Credit Ratings and Repair - Part 3

Dr. Boyce Watkins
www.BoyceWatkins.com

According to the Consumer Credit Counseling Service, 1 in 5 college freshmen owes more than $10,000 in credit card debt. This makes the clear case that financial literacy and education is critical for our young people.

This article is part 3 in our series of articles on credit reports and understanding the basics of credit. For more on this topic, please visit www.DrBoyceFinance.com. We have covered the basics of what credit reports are, how they work, and how to obtain your report. We can now dig deeper into your rights as a consumer when it comes to your credit. Remember: knowledge is power!

Do I have any rights as a consumer when it comes to my credit reports?

To determine your rights as a consumer, you should consult the Fair Credit Reporting Act. You would be surprised at the number of rights you have when it comes to protecting your credit. But you will likely not be surprised when I tell you that credit card companies and other firms don’t always want you to know your rights. But in your quest toward financial literacy, it is our goal to ensure that you know what you need to know.

Under the Fair Credit Reporting Act, you have a right to do the following:

- Receive one free copy of your credit report every year. You can contact one of the 3 major reporting agencies to get your copy.

• You are entitled to a free report is adverse action is taken against you by a company (denying you insurance, credit or employment). You must ask for your report within 60 days of this action in order to get one. In the notice, you will receive the name, address and phone number of the consumer reporting company that sent the derogatory information.

• You are entitled to one free report per year if you are unemployed and plan to look for a job within 60 days, are on welfare, or if your report is inaccurate because of fraud (like someone stealing your identity).

• If you cannot get a free report, the companies are allowed to charge you up to $9.50 for a second copy.

• You are given the legal right to know what has been asked on your report within the past year – two years for employment related requests.

• If a company denies your application, you have the right to the name and address of the consumer reporting company they contacted, assuming that they contacted a reporting agency to get the information

• If you question the accuracy or completeness of information in your report, you have the right to file a dispute with the consumer reporting company and the information provider (that is, the person, company, or organization that provided information about you to the consumer reporting company). The consumer reporting company and the company that provided the information are obligated to investigate and get back to you about the matter in dispute

• For a small fee, you are allowed to add summary explanatory information for potential lenders to consider when evaluating your credit report.


The Equal Credit Opportunity Act


• This act prohibits credit discrimination on the basis of sex, race, marital status, religion, national origin, age, or receipt of public assistance. Creditors may ask for this information (except religion) in certain situations, but they may not use it to discriminate against you when deciding whether to grant you credit.

• You cannot be denied credit based on your race, sex, marital status, religion, age, national origin, or receipt of public assistance.

• You have the right to have reliable public assistance considered in the same manner as other income. That means that if you are on welfare or social security, your source of income cannot be used to make a character judgment against you.

• If you are denied credit, you have a legal right to know why.

The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA)

These acts describe the law in terms of how to deal with mistakes on billing for credit and electronic funds transfers. Details are below:

• charges or electronic fund transfers that you – or anyone you have authorized to use your account – have not made;

• charges or electronic fund transfers that are incorrectly identified or show the wrong date or amount;

• math errors;

• failure to post payments, credits, or electronic fund transfers properly;

• failure to send bills to your current address – provided the creditor receives your change of address, in writing, at least 20 days before the billing period ends;

• charges or electronic fund transfers for which you ask for an explanation or written proof of purchase along with a claimed error or request for clarification.

The FCBA usually applies to accounts that are “open-ended”, such as credit cards and revolving charge accounts, such as those you get with department stores. It does not apply to loans that are made with fixed payments until the balance is paid off, such as auto loans. The EFTA applies to electronic transfers, such as those done through ATMs, point of sale purchases, etc.


The Fair Debt Collection Practices Act (FDCPA)

This act protects you if you owe money and others are trying to collect from you. It can be money owed for the purchase of a car, credit cards, etc. Basically, personal, family and household debts are included here. This act basically protects you from unfair, abusive or deceptive practices on the part of bill collectors. Under the Fair Debt Collection Practices Act:

• Debt collectors may contact you only between 8 a.m. and 9 p.m.

• Debt collectors may not contact you at work if they know your employer disapproves.

• Debt collectors may not harass, oppress, or abuse you.

• Debt collectors may not lie when collecting debts, such as falsely implying that you have committed a crime.

• Debt collectors must identify themselves to you on the phone.

• Debt collectors must stop contacting you if you ask them to do so in writing.

Finding ways to fix your credit score

A poor credit report will haunt you like a ghost in the night. It can affect your ability to get a job, get a loan, or even get insurance. If the information in your report is accurate, it can only be removed through patience and persistence.

A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for 10 years. Information about an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer.


Quickest ways to repair your credit score

1) Pay down your debt
2) Stop or significantly reduce credit card use
3) Dispute the negative items on your report if they appear inaccurate at all (more details on these steps is presented below)

If you are having problems paying your bills, contact your creditors immediately. Try to work out a modified payment plan with them that reduces your payments to a more manageable level. Don’t wait until your account has been turned over to a debt collector.

Here are some additional tips for solving credit problems:

• If you want to dispute a credit report, bill or credit denial, write a letter to the company, sending the letter “return receipt requested.”

• When you dispute a billing error, include your name, account number, the dollar amount in question, and explain why you believe the amount of the debt is wrong.

• If in doubt, request written verification of a debt.

• Keep all your original documents, especially receipts, sales slips, and billing statements. You will need them if you dispute a credit bill or report. Send copies only. It may take more than one letter to correct a problem.

• Be skeptical of businesses that offer instant solutions to credit problems: There aren’t any.

• Be persistent. There is substitute for time and patience when it comes to fixing your credit.

• Most of what these credit repair companies can do for you are things that you can do for yourself without paying them. For example, many of them will send letters to the credit bureaus questioning debts on your report, but you can do this WITHOUT having to pay a fee to anyone.

• You may want to consider contacting a credit counseling organization. These organizations work if you feel comfortable sticking with a budget, and are serious about repaying your debts. But be careful. Many of these companies are a bit sneaky. For example, they call themselves “nonprofit” to make you think that they are part of the government or that they work for charity. Let’s be clear: many of them are trying to make money from you! Ensure that the company is accredited by the National Foundation for Credit Counseling (NFCC), and that there are no complaints about them with the Better Business Bureau.

• Most credit counselors offer services through local offices, the Internet, or on the telephone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.

• Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.

Things you should NOT do if you want to repair your credit score

1) Make late payments
2) Close your credit accounts
3) Apply for new credit cards
4) Consolidate your debt – this is a tricky one, since debt consolidation may not always be bad, but applying for more debt is almost always a bad thing. This can be especially harmful if you consolidate a number of credit cards into one card, since that will affect your ratio of debt used to debt available.