| GreenPath Overview | How We Can Help | How We Are Different | Evaluate Your Options | When to Contact Us | Self Evaluation |
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BUILDING A BETTER CREDIT RECORD Newspapers, radio, TV and the
Internet are filled with advertisements that offerfor a feeto erase accurate
negative information in your credit file. The scam artists who run these
ads can't deliver. Only time, a deliberate effort, and a plan to repay your
bills will improve your credit record.
This publication is
designed to help you understand and legally improve your credit report. This
publication has five sections: Section 1 : explains how
consumer reporting agencies work and your rights under the Fair Credit
Reporting Act. Section 2 : explains how you
can legally improve your credit report. Section 3 : offers tips on
dealing with debt. Section 4 : cautions you about credit-related scams and how to avoid
them. Section 5 : lists resources for
additional information. Consumer Reporting
Agencies If you've ever applied for a
credit card, a personal loan, or insurance, there's a file about you. This file
contains information on where you work and live, how you pay your bills, and
whether you've been sued, arrested, or filed for bankruptcy. Companies that gather and
sell this information are called Consumer Reporting Agencies (CRAs). The most common type of CRA is the credit bureau.
The information CRAs sell about you to creditors,
employers, insurers, and other businesses is called a consumer report. The Fair Credit Reporting Act (FCRA) The FCRA is designed to
promote accuracy and ensure the privacy of information used in consumer
reports. Recent amendments to the Act expand your rights and place additional
requirements on CRAs. Businesses that supply
information about you to CRAs and those that use
consumer reports also have new responsibilities under the law. Here are some questions
consumers commonly ask about consumer reports and CRAsand
the answers. Q. How do I find the CRA that
has my report? A. Contact the CRAs listed in the
Yellow Pages under "credit" or "credit rating and
reporting." Because more than one CRA may have a file on you, call each
until you have located all the agencies maintaining your file. The three major
credit bureaus are: PO Box 740241 Atlanta, GA 30374-0241 (800) 685-1111 PO Box 2002 Allen, TX 75013 (888) EXPERIAN (397-3742) PO Box 1000 Chester, PA 19022 (800) 916-8800 In addition, anyone who
takes action against you in response to a report supplied by a CRAsuch as
denying your application for credit, insurance, or employmentmust give you the
name, address, and telephone number of the CRA that provided the report. Q. Do I have a right to know
what's in my report? A. Yes, if you ask for it. The CRA must tell you everything
in your report, including medical information, and in most cases, the sources
of the information. The CRA also must give you a list of everyone who has
requested your report within the past yeartwo years for employment related
requests. Q. Is there a charge for my
report? A. Sometimes. There's no charge if a company takes adverse
action against you, such as denying your application for credit, insurance or
employment, and you request your report within 60 days of receiving the notice
of the action. The notice will give you the name, address, and phone number of
the CRA. In addition, you're entitled to one free report a year if you certify
in writing that (1) you're unemployed and plan to look for a job within 60
days, (2) you're on welfare, or (3) your report is inaccurate because of fraud.
Otherwise, a CRA may charge you up to $8.50 for a copy of your report. Even if you have not been
denied credit, you may want to find out what information is in your credit
report. Some financial advisors suggest that you review your credit report
periodically for inaccuracies or omissions. This could be especially important
if you're considering a major purchase, such as buying a home or a car.
Checking in advance on the accuracy of the information in your credit report
could speed the credit-granting process. Q. What type of
information do credit bureaus collect and sell? A. Credit Bureaus collect and sell four basic types of
information. Identification and employment information Your
name, birth date, Social Security number, employer, and spouse's name are
routinely noted. The CRA also may provide information about your employment
history, home ownership, income, and previous address, if a creditor requests
this type of information. Payment history Your accounts with
different creditors are listed, showing how much credit has been extended and
whether you've paid on time. Related events, such as referral of an overdue
account to a collection agency, may also be noted. Inquiries CRAs must maintain a record of all creditors who have asked for
your credit history within the past year, and a record of those persons or
businesses requesting your credit history for employment purposes for the past
two years. Public record
information Events that are a matter of
public record, such as bankruptcies, foreclosures, or tax liens, may appear in
your report. Improving Your Credit
Report Under the law, both the CRA
and the organization that provided the information to the CRA, such as a bank
or credit card company, have responsibilities for correcting inaccurate or
incomplete information in your report. To protect all your rights under the law,
contact both the CRA and the information provider if you have a dispute. First, tell the CRA in
writing what information you believe is inaccurate. Include copies (not
originals) of documents that support your position. In addition to providing
your complete name and address, your letter should clearly identify each item
in your report you dispute, state the facts and explain why you dispute the
information, and request deletion or correction. You may want to enclose a copy
of your report with the items in question circled. Your letter may look
something like the one below. Send your letter by certified mail, return
receipt requested, so you can document what the CRA received. Keep copies of
your dispute letter and enclosures. Sample Dispute Letter Date Your Name Your Address Your City, State, Zip Code Complaint Department Name of Credit Reporting
Agency Address City, State, Zip Code Dear Sir or Madam: I am writing to dispute the
following information in my file. The items I dispute also are encircled on the
attached copy of the report I received. This item (identify item(s)
disputed by name of source, such as creditors or tax court, and identify type
of item, such as credit account, judgment, etc.) is (inaccurate or incomplete)
because (describe what is inaccurate or incomplete and why). I am requesting
that the item be deleted (or request another specific change) to correct the
information. Enclosed are copies of (use
this sentence is applicable and describe any enclosed documentation, such as payment
records, court documents) supporting my position. Please reinvestigate this
(these) matter(s) and (delete or correct) the disputed item(s) as soon as
possible. Sincerely, Your name Enclosures: (List what you
are enclosing) CRAs must reinvestigate the item(s) in questionusually within
30 daysunless they consider your dispute frivolous. They also must forward all
relevant data you provide about the dispute to the information provider. After
the information provider receives notice of a dispute from the CRA, it must
investigate, review all relevant information provided by the CRA, and report
the results to the CRA. If the information provider finds the disputed
information to be inaccurate, it must notify all nationwide CRAs
so that they can correct this information in your file. Disputed information that cannot
be verified must be deleted from your file. If your report contains
inaccurate information, the CRA must correct it. If an item is incomplete, the
CRA must complete it. For example, if your file showed that you were late
making payments, but failed to show that you were no longer delinquent, the CRA
must show that your payments are now current. If your file shows an account
that belongs only to another person, the CRA must delete it. When the reinvestigation is
complete, the CRA must give you the written results and a free copy of your
report if the dispute results in a change. If an item is changed or removed,
the CRA cannot put the disputed information back in your file unless the information
provider verifies its accuracy and completeness, and the CRA gives you a
written notice of its intent to reinsert the items that includes the name,
address, and phone number of the provider. If you request, the CRA must
send notices of any correction to anyone who received your report in the past
six months. You can have a corrected copy of your report sent to anyone who
received a copy during the past two years for employment purposes. If a
reinvestigation does not resolve your dispute, ask the CRA to include your
statement of the dispute in your file and in future reports. In addition to writing to the
CRA, you should tell the creditor or other information provider in writing
that you dispute an item. Be sure to include copies (not originals) of
documents that support your position. Many providers specify an address for
disputes. If the provider continues to report the disputed item to any CRA
after receiving your notice, it must include a notice that you dispute the
item. If you are correctthat is, if the information is not accuratethe
information provider may not report it again. Accurate Negative Information When negative information
in your report is accurate, only the passage of time can assure its removal.
Accurate negative information generally can stay on your report for seven
years. There are certain exceptions: Bankruptcy information may be
reported for 10 years. Credit information reported in
response to an application for a job with a salary of more than $75,000 has no
time limit. Information about criminal
convictions has no time limit. Credit information reported
because of an application for more than $150,000 worth of credit or life
insurance has no time limit. Default information concerning
U.S. Government insured or guaranteed student loans can be reported for seven
years after certain guarantor actions. Information about a lawsuit or
an unpaid judgment against you can be reported for seven years or until the
statute of limitations runs out, whichever is longer. Seven-year Reporting Period There is a standard method
for calculating the seven-year reporting period. Generally, the period runs
from the date that the event took place. With regard to any
delinquent account placed for collectioninternally or by referral to a
thirdparty debt collector, whichever is earliercharged to profit and loss, or
subjected to any similar action, the seven-year period is calculated from the
date of the delinquency that occurred immediately before the collection
activity, charge to profit and loss, or similar action. For example, assume
that your payments on a loan were late in January, but that you caught up in
February. You were late again in May, but caught up in July. You were again
late in September, but did not catch up before the account was turned over to a
collection agency in December. You made no more payments on the account, and it
is charged to profit and loss in July of the following year. Under the FCRA, the January
and May late payments each can be reported for seven years. The collection
activity and the charge to profit and loss can be reported for seven years from
the date of the September payment, which was the delinquency that occurred
immediately before those activities. Adding Accounts to Your File Your credit file may not
reflect all your credit accounts. Although most national department store and
all-purpose bank credit card accounts will be included in your file, not all
creditors supply information to CRAs: Some travel,
entertainment, gasoline card companies, local retailers, and credit unions are
among those creditors that don't. If you've been told that
you were denied credit because of an "insufficient credit file" or
"no credit file" and you have accounts with creditors that don't
appear in your credit file, ask the CRA to add this information to future
reports. Although they are not required to do so, many CRAs
will add verifiable accounts for a fee. However, understand that if these
creditors do not report to the CRA on a regular basis, the added items will not
be updated in your file. Dealing with Debt Are you having trouble paying
your bills? Are you getting dunning notices from creditors? Are your accounts
being turned over to debt collectors? Are you worried about losing your home or
your car? You're not alone. Many
people face financial crises at some time in their lives. Whether the crisis is
caused by personal or family illness, the loss of a job, or simple
overspending, it can seem overwhelming, but often can be overcome. The fact of
the matter is that your financial situation doesn't have to go from bad to
worse. If you or someone you know
is in financial hot water, consider these options: realistic budgeting, credit
counseling from a reputable organization, debt consolidation, or bankruptcy.
How do you know which will work best for you? It depends on your level of debt,
your level of discipline, and your prospects for the future. Self-Help Developing a Budget The first step toward
taking control of your financial situation is to do a realistic assessment of
how much money comes in and how much money you spend. Start by listing your
income from all sources. Then, list your "fixed" expensesthose that
are the same each monthsuch as your mortgage payments or your rent, car
payments, or insurance premiums. Next, list the expenses that vary, such as
entertainment, recreation, or clothing. Writing down all your expenseseven
those that seem insignificantis a helpful way to track your
spending patterns, identify the expenses that are necessary, and prioritize the
rest. The goal is to make sure you can make ends meet on the basics: housing,
food, health care, insurance, and education. Your public library has
information about budgeting and money management techniques. Low cost budgeting
counseling services that can help you analyze your income and expenses and
develop a budget and spending plan also are available in most communities.
Check your Yellow Pages or contact your local bank or consumer protection
office for information about them. In addition, many universities, military
bases, credit unions, and housing authorities operate nonprofit financial
counseling programs. Contacting Your
Creditors Contact your creditors
immediately if you are having trouble making ends meet. Tell them why it's
difficult for you, and try to work out a modified payment plan that reduces your
payments to a more manageable level. Don't wait until your accounts have been
turned over to a debt collector. At that point, the creditors have given up on
you. Dealing with Debt
Collectors The Fair Debt Collection
Practices Act is the federal law that dictates how and when a debt collector
may contact you. A debt collector may not call you before 8 a.m., after 9 p.m.,
or at work if the collector knows that your employer doesn't approve of the
calls. Collectors may not harass you, make false statements, or use unfair
practices when they try to collect a debt. Debt collectors must honor a written
request from you to stop further contact. Credit Counseling If you aren't disciplined
enough to create a workable budget and stick to it, can't work out a repayment
plan with your creditors, or can't keep track of mounting bills, consider
contacting a credit counseling service. Your creditors may be willing to accept
reduced payments if you enter into a debt repayment plan with a reputable
organization. In these plans, you deposit money each month with the credit
counseling service. Your deposits are used to pay your creditors according to a
payment schedule developed by the counselor. As part of the repayment plan, you
may have to agree not to apply foror useany additional credit while you're
participating in the program. A successful repayment plan
requires you to make regular, timely payments, and could take 48 months or
longer to complete. Ask the credit counseling service for an estimate of the
time it will take you to complete the plan. Some credit counseling services
charge little or nothing for managing the plan; others charge a monthly fee
that could add up to a significant charge over time. Some credit counseling
services are funded, in part, by contributions from creditors. While a debt repayment plan
can eliminate much of the stress that comes from dealing with creditors and
overdue bills, it does not mean you can forget about your debts. You still are
responsible for paying any creditors whose debts are not included in the plan.
You are responsible for reviewing monthly statements from your creditors to
make sure your payments have been received. If your repayment plan depends on
your creditors agreeing to lower or eliminate interest and finance charges, or
waive late fees, you are responsible for making sure these concessions are
reflected on your statements. A debt repayment plan does
not erase your negative credit history. Accurate information about your
accounts can stay on your credit report for up to seven years. In addition,
your creditors will continue to report information about accounts that are
handled through a debt repayment plan. For example, creditors may report that
an account is in financial counseling, that payments have been late or missed
altogether, or that there are write-offs or other concessions. A demonstrated
pattern of timely payments, however, will help you get credit in the future. Auto and Home Loans Debt repayment plans
usually cover unsecured debt. Your auto and home loan, which are considered
secured debt, may not be included. You must continue to make payments to these
creditors directly. Most automobile financing
agreements allow a creditor to repossess your car any time you're in default.
No notice is required. If your car is repossessed, you may have to pay the full
balance due on the loan, as well as towing and storage costs, to get it back.
If you can't do this, the creditor may sell the car. If you see default
approaching, you may be better off selling the car yourself and paying off the
debt: You would avoid the added costs of repossession and a negative entry on
your credit report. If you fall behind on your
mortgage, contact your lender immediately to avoid foreclosure. Most lenders
are willing to work with you if they believe you're acting in good faith and
the situation is temporary. Some lenders may reduce or suspend your payments
for a short time. When you resume regular payments, though, you may have to pay
an additional amount toward the past due total. Other lenders may agree to
change the terms of the mortgage by extending the repayment period to reduce
the monthly debt. Ask whether additional fees would be assessed for these
changes, and calculate how much they total in the long run. If you and your lender
cannot work out a plan, contact a housing counseling agency. Some agencies
limit their counseling service to homeowners with FHA mortgages, but many offer
free help to any homeowner who's having trouble making mortgage payments. Call
the local office of the Department of Housing and Urban Development (HUD) or
the housing authority in your state, city, or county for help in finding a
housing counseling agency near you. Debt Consolidation You may be able to lower
your cost of credit by consolidating your debt through a second mortgage or a
home equity line of credit. Think carefully before taking this on. These loans
require your home as collateral. If you can't make the paymentsor if the
payments are lateyou could lose your home. The costs of these consolidation
loans can add up. In addition to interest on the loan, you pay
"points." Typically, one point is equal to one percent of the amount
you borrow. Still, these loans may provide certain tax advantages that are not
available with other kinds of credit. Bankruptcy Personal bankruptcy
generally is considered the debt management tool of last resort because the
results are long-lasting and far-reaching. A bankruptcy stays on your credit
report for 10 years, making it difficult to acquire credit, buy a home, get
life insurance, or sometimes get a job. However, it is a legal procedure that
offers a fresh start for people who can't satisfy their debts. Individuals who
follow the bankruptcy rules receive a discharge a court order that says they
do not have to repay certain debts. There are two primary types
of personal bankruptcy: Chapter 13 and Chapter 7. Each must be filed in federal
bankruptcy court. The current fees for seeking bankruptcy relief are $160: a
filing fee of $130 and an administrative fee of $30. Attorney fees are
additional and can vary widely. The consequences of bankruptcy are significant
and require careful consideration. Chapter 13 allows you, if you have a regular income and limited debt,
to keep property, such as a mortgaged house or car, that
you otherwise might lose. In Chapter 13, the court approves a repayment plan
that allows you to pay off a default during a period of three to five years,
rather than surrender any property. Chapter 7, known as straight bankruptcy, involves liquidating all
assets that are not exempt. Exempt property may include cars, work-related
tools and basic household furnishings. Some property may be sold by a
court-appointed official a trustee or turned over to creditors. You can
receive a discharge of your debts under Chapter 7 only once every six years. Both types of bankruptcy
may get rid of unsecured debts and stop foreclosures, repossessions,
garnishments, utility shut-offs, and debt collection activities. Both also
provide exemptions that allow you to keep certain assets, although exemption
amounts vary. Personal bankruptcy usually does not erase child support,
alimony, fines, taxes, and some student loan obligations. Also, unless you have
an acceptable plan to catch up on your debt under Chapter 13, bankruptcy
usually does not allow you to keep property when your creditor has an unpaid
mortgage or lien on it. Avoiding Scams Turning to a business that
offers help in solving debt problems may seem like a reasonable solution when
your bills become unmanageable. Be cautious. Before you do business with any
company, check it out with your local consumer protection agency or the Better
Business Bureau in the company's location. Ads Promising Debt Relief May Be Offering
Bankruptcy Consumer debt is at an
all-time high. What's more, a record number of consumersnearly 1.45 million in
1998are filing for bankruptcy. Whether your debt dilemma is
the result of an illness, unemployment, or overspending, it can seem
overwhelming. In your effort to get solvent, be on the alert for
advertisements that offer seemingly quick fixes. While the ads pitch the
promise of debt relief, they rarely say relief may be spelled b-a-n-k-r-u-p-t-c-y. And although bankruptcy is one option to deal with
financial problems, it's generally considered the option of last resort. The
reason: it has a long-term negative impact on your creditworthiness. A
bankruptcy stays on your credit report for 10 years, and can hinder your
ability to get credit, a job, insurance, or even a place to live. Bankruptcy
has a long-term negative impact on your creditworthiness. The Federal Trade
Commission cautions consumers to read between the lines when faced with ads in
newspapers, magazines, or even telephone directories that say: "Consolidate your bills into one monthly
payment without borrowing" "STOP credit
harassment, foreclosures, repossessions, tax levies and
garnishments" "Keep Your
Property" "Wipe out your
debts! Consolidate your bills! How? By using the protection
and assistance provided by federal law. For once, let the law work for
you!" You'll find out later that
such phrases often involve bankruptcy proceedings, which can hurt your credit
and cost you attorneys' fees. Advance-Fee Loan Scams These scams often target
consumers with credit problems or consumers who have difficulty getting credit.
In exchange for an up-front fee, these companies guarantee that applicants will
get the credit they wantusually a credit card or a personal loan. The upfront fee may range
from $100 to several hundred dollars. Resist the temptation to follow up on
advance-fee loan guarantees. They may be illegal. Many legitimate creditors
offer extensions of credit, such as credit cards, loans, and mortgages, through
telemarketing and require an application fee or appraisal fee in advance. But
legitimate creditors never guarantee in advance that you'll get the
loan. Under the federal Telemarketing Sales Rule, a seller or telemarketer who
guarantees or represents a high likelihood of your getting a loan or some other
extension of credit may not ask for or receive payment until you've
received the loan. Recognizing an
Advance-Fee Loan Scam There are many fraudulent
loan brokers and other individuals misrepresenting the availability of credit
and credit terms. One of their favorite strategies is the
"advance-fee" loan scam. That's where they claim to guarantee that
they can get a loan or other type of credit for youbut you must pay a fee before
you apply. Ads for advance-fee loans
often appear in the classified ad section of local and national newspapers and
magazines. They also may appear in mailings, radio spots, and on local cable
stations. Often, these ads feature "900" numbers, which result in
charges on your phone bill. In addition, these companies often use delivery
systems other than the U.S. Postal Service, such as overnight or courier
services, to avoid detection and prosecution by postal authorities. Don't confuse a legitimate
credit offer with an advance-fee loan scam. An offer for credit from a bank,
savings and loan, mortgage broker generally requires your verbal or written
acceptance of the loan or credit offer. The offer usually is subject to a check
of your credit report after you apply to make sure you meet their credit
standards. You are usually not required to pay a fee in order to get the
credit. Be suspicious of anyone who
calls you on the phone and says they can guarantee you will get a loan if you
pay in advance. Hang up. It's against the law. Protecting Yourself Here are some points to
keep in mind before you respond to ads that promise easy credit, regardless of
your credit history:
Credit Repair Scams You see the ads in
newspapers, on TV, and on the Internet. You hear them on the radio. You get
fliers in the mail. You may even get calls from telemarketers offering credit
repair services. They all make the same claims: "Credit problems? No problem!" "We can erase your
bad credit100% guaranteed." "Create a new
credit identitylegally." "We can remove
bankruptcies, judgments, liens, and bad loans from your
credit file forever!" Do yourself a favor and
save some money too. Don't believe these
statements. Only time, a conscientious effort, and a plan for repaying your
debt will improve your credit report. The Scam Everyday, companies nationwide appeal to consumers with poor credit
histories. They promise, for a fee, to clean up your credit report so you can
get a car loan, a home mortgage, insurance, or even a job. The truth is, they can't deliver. After you pay them hundreds or
thousands of dollars in up-front fees, these companies do nothing to improve
your credit report; many simply vanish with your money. The Warning Signs
You could be charged and
prosecuted for mail or wire fraud if you use the mail or telephone to apply for
credit and provide false information. It's a federal crime to make false
statements on a loan or credit application, to misrepresent your Social
Security number, and to obtain an Employer Identification Numbers from the
Internal Revenue Service under false pretenses. The Credit Repair
Organizations Act By law, credit repair
organizations must give you a copy of the "Consumer Credit File Rights Under State and Federal Law" before you sign a
contract. They also must give you a written contract that spells out your
rights and obligations. Read these documents before signing the contract. The
law contains specific consumer protections. For example, a credit repair
company cannot:
Your contract must specify:
If You Are A Victim Where to Complain... If you've had a problem with any
of the scams described here, contact your local consumer protection agency,
state Attorney General (AG), or Better Business Bureau. Many AGs have toll-free
consumer hotlines. Check with your local directory assistance. You can file a complaint with
the FTC by contacting the Consumer Response Center by phone: toll-free
1-877-FTC-HELP (382-4357); TDD: 202-326-2502; by mail: Consumer Response
Center, Federal Trade Commission, 600 Pennsylvania Ave, NW, Washington, DC
20580; or through the Internet, using the online
complaint form. Although the
Commission cannot resolve individual problems for consumers, it can act against
a company if it sees a pattern of possible law violations. The FTC publishes free
brochures on many consumer issues. For a complete list of publications, write for Best Sellers, Consumer Response Center,
Federal Trade Commission, 600 Pennsylvania Ave, NW,
Washington, DC 20580; or call toll-free 1-877-FTC-HELP (382-4357), TDD
202-326-2502.
For More Information The Federal Trade
Commission enforces a number of credit
laws and provides consumers with free information about them: The Equal Credit
Opportunity Act prohibits the denial
of credit because of your sex, race, marital status, religion, national origin,
age, or because you receive public assistance. The Fair
Credit Reporting Act gives you the
right to learn what information is being distributed about you by credit
reporting agencies. The Truth in Lending
Act requires lenders to give you
written disclosures of the cost of credit and terms of repayment before you
enter into a credit transaction. The Fair
Credit Billing Act establishes
procedures for resolving billing errors on your credit card accounts. The Fair
Debt Collection Practices Act
prohibits debt collectors from using unfair or deceptive practices to collect
overdue bills that your creditor has forwarded for collection. You can file a complaint
with the FTC by contacting the Consumer Response Center by phone: toll-free
1-877-FTC-HELP (382-4357); TDD: 202-326-2502; by mail: Consumer Response
Center, Federal Trade Commission, 600 Pennsylvania Ave, NW, Washington, DC
20580; or through the Internet, using the online
complaint form. Although the
Commission cannot resolve individual problems for consumers, it can act against
a company if it sees a pattern of possible law violations. The FTC publishes free
brochures on many consumer issues. For a complete list of publications, write for Best Sellers, Consumer Response Center,
Federal Trade Commission, 600 Pennsylvania Ave, NW,
Washington, DC 20580; or call toll-free 1-877-FTC-HELP (382-4357), TDD
202-326-2502. |
