Laws Regulating Credit Reports

Your credit report contains a detailed record of all of your credit accounts, including the amounts you owe, the dates and amounts of your payments and how long you have been managing the accounts. The federal government has several laws that regulate how companies can compile and use your credit reports.

Fair Credit Reporting Act

The major law regulating your credit report is the Fair Credit Reporting Act. This law requires that consumer reporting agencies --- which collect information and compile your credit reports --- allow you to access your reports. If you find anything that you believe is incorrect, you can dispute this information; and if it is found to be in error, the consumer reporting agencies must stop including it on your credit reports. The Fair Credit Reporting Act also requires that the credit bureaus directly provide you a free copy of your credit report upon your request if you are denied credit, are on welfare, have an inaccurate report due to fraud, or are unemployed and looking for work within 60 days.

Fair and Accurate Credit Transactions Act

The Fair and Accurate Credit Transactions Act is an amendment to the Fair Credit Reporting Act that provides consumers with free access to their credit reports. You can get one free credit report per year from each of the consumer reporting agencies, in addition to the free reports authorized by the Fair Credit Reporting Act. Obtain your free credit reports by visiting the Annual Credit Report website, which is the only government-authorized source of your free reports under this law.

Fair Credit Billing Act

The Fair Credit Billing Act is mostly designed to give consumers the right to dispute billing errors on credit cards and other lines of credit. It intersects with credit reports by including a provision that prohibits creditors from reporting an account as delinquent until the dispute has been resolved. This protects your credit rating from being damaged by billing errors.

Equal Credit Opportunity Act

The Equal Credit Opportunity Act requires that lenders evaluate applications fairly, without considering an applicant's age, race, gender or marital status. This affects your credit report because it requires that some information on your report not be included in credit scoring. For example, although your date of birth appears on your credit report, the lender is not allowed to use this in a discriminatory fashion. If your application for credit is denied, the Equal Credit Opportunity Act requires that the lender notify you of the reasons for denial.

Read More

Can a Credit Union Help Improve Credit?

Bankrate reports that as of 2010, there were almost 7,700 credit unions operating in the United States. Credit unions operate as nonprofits, meaning they can offer better terms and rates to their customers. As a customer, you can apply for different credit products, such as credit cards and auto loans, which will help you build a positive credit history and score.

Basics

A credit union works like a traditional bank, except a credit union requires membership. Qualifying for membership depends on the type of credit union. For example, many large corporations operate a credit union for their employees and employees' family members. Credit unions offer checking and savings accounts. Many credit unions also offer credit products that can help raise your credit scores, if managed properly.

Credit Cards

Many credit unions offer credit cards for their members. Since credit unions operate on a smaller scale than large, national credit card companies, they may offer easier approval terms. If you have had past credit problems, you may still qualify for a credit card through your credit union. Opening a credit card through a credit union will increase your available credit limit and help you build a payment history, both of which help your credit rating. Credit union credit cards also typically come with lower fees than major-label credit cards. Bankrate reports that as of 2009, the fees associated with credit union credit cards ran an average of 20 percent lower than larger banks.

Loans

Several credit unions offer auto loans. You can finance both used and new cars through a credit union. The auto loans have similar terms to a loan through a national bank, and often come with similar or lower interest rates. Financing a car can help improve your credit rating. Opening an auto loan will add to your credit mix, which factors into your credit score. Many credit unions also offer perks to their existing members wishing to open a car loan.

Tips

Using the credit products offered through a credit union will only help improve your credit if you manage them well. Pay at least your monthly minimum credit card payment on time each month. Keep the balance on your credit card low, or pay the balance off entirely each month. Make the payment on your auto loan on time each month. If you do not manage your credit card or auto loan responsibly, it will hurt your credit report and score.

Read More

How to Negotiate With a Creditor to Update a Credit Report

If you've just paid off a delinquent credit account or removed your name as a joint account holder from a credit account, it can be frustrating having to wait until a creditor decides to report the information to the three national consumer reporting bureaus: TransUnion, Equifax and Experian. Using a few strategies, you can negotiate with your creditor to update your credit reports as promptly as possible. The process is moderately easy, but does require legwork.

Instructions

1

Obtain a copy of your credit report from one of the three national credit reporting agencies. Circle or notate the incorrect, incomplete or missing information on your credit report(s) and provide your creditor with a copy. Contact your creditor by phone or mail. Either option is effective.

2

Ask your creditor to update your credit report on a rolling basis. Creditors may update consumer reports on a set date after the close of a billing cycle, so ask your creditor to update your report on a rolling basis. Ask if a company representative or manager can provide written notification confirming a promised report date.

3

Explain the importance of having the new information documented on your credit report. For example, explain that in 30 days you will apply for an auto loan and want to receive the lowest interest rate possible.

4

Find out which credit reporting agency will receive the information. Be sure that all three of your credit reports are updated at the same time. Follow up with each credit reporting agency to verify the changes.

5

Quote the law. When dealing with a dispute, remind your creditor that according to the Fair Credit Reporting Act any item in dispute must be investigated and removed, if found to be inaccurate, within 90 days of a dispute letter being sent by a consumer. If you have not already sent a dispute letter, do so now.

6

Threaten to report the creditor to the Federal Trade Commission, Better Business Bureau and your state's attorney's general office. Each has the authority to receive and investigate complaints against creditors.

Read More

What to Write to a Credit Card Company to Remove My Ex-Spouse's Charges From My Report?

You may be disappointed to learn that divorcing a spouse does not necessarily cut all ties with him. In fact, you may find some of your spouse's debts on your credit report. Unfortunately, this probably means you legally owe them. You could write the creditor to fight your liability to pay the debt, but your plea may fall on deaf ears.

Identification

There probably is little you can say in a letter to remove an ex-spouse's charges from your report. If you had a joint account with a spouse, you are liable for payment on the account even if a judge says otherwise. Experian, one of the major credit reporting bureaus, tells consumers to explain to the creditor that you do not owe the spouse's debts. Even this may not stop collection efforts on the part of the creditor, but at least you can show responsible actions in case of a lawsuit over the debt.

Considerations

It is better to pay debt on a joint account rather than ignore and try to fight the charges. You can later ask a judge to enforce an indemnity agreement to get the spouse to repay the debt. If the account was in error or the spouse took an account in your name after a judge signed the official divorce papers, you could send proof that you are not the account holder, such as government identification and proof of the dissolution of marriage. Some states require both spouses to pay any debt incurred during marriage, while others may require you to pay the debt even if you name never appeared on the account.

Considerations

Ideally, you want to work out a plan with your spouse to determine who gets what debts. Once you do this, you can ask the lender to assign the charges to your individual accounts. Even in this case, the creditor might still consider you both liable for the debts. Secured debts, such as a mortgage, usually require both spouses to agree to refinance the debt.

Tip

You should hire a lawyer to help you enforce court orders that require a spouse to pay a certain debt. You also may need to determine what debts you both must pay if you live in a community property state. You and your spouse may want to get individual consolidation loans as a convenient way to keep track of your debts. You should keep any disputed account current so you can protect your credit score and qualify for loans on your own.

Read More

Can My Bad Credit Affect My Spouse?

Although your bad credit does not directly affect your spouse's credit score, it can have several indirect effects as you move forward in managing your finances together. Before getting married, you should discuss your credit scores so you don't run into any surprises when you apply for credit together after the wedding.

Separate Scores

Credit scoring is done on an individual basis, so even after getting married, you and your spouse will maintain separate credit scores. You will each have the credit history from before you got married, which means you will be stuck with your bad credit. The good news is that this bad credit does not transfer onto your spouse's credit report. Only accounts that you hold jointly will appear on both of your credit reports.

Borrowing Together

Your bad credit will affect the terms of the credit you and your spouse are offered when you apply jointly. This is most relevant when you apply for a mortgage because the interest rate offered based on your credit could force you to pay thousands more dollars in interest than you would have if your spouse applied alone. In fact, some couples choose to have only the spouse with good credit apply for a mortgage. However, this can result in a lower approval amount because only the applicant's income is considered.

Other Effects

If your bad credit includes unpaid debts in your name, these can affect your spouse indirectly. This is because some of your income must go toward paying these debts, which reduces your ability to contribute to joint household expenses. Another potential effect of your bad credit is that it can affect the premiums you pay on your joint auto insurance policy. Lastly, your bad credit can cause emotional stress in the marriage by causing your spouse to feel that you are the cause of financial problems you have together.

Tips

Work together with your spouse to help increase your credit score. His good money management skills that have led to a good credit score are teachable, so let him help you to pay bills on time and manage your debt wisely after you are married. Another way to increase your credit score is to have him add you as an authorized user on his credit card. This will cause the account history on that card to be added to your credit score, which should boost it.

Read More

Does Refinancing Change a Credit Score?

A lender will often report credit accounts to the credit bureaus. The bureaus compile this data and keep it within their database. This information is used to create a consumer credit report on you. Refinancing occurs when you take out a larger loan over an extended period of time to pay off a smaller loan, and this may have an impact on your credit score.

Credit Scores

Your FICO credit score represents how you handle credit and ranges from 300 to 850, according to FICO. It has five areas. The largest portion of the score measures how well you pay your bills at 35 percent. Thirty percent is the amount of debt you have, 15 percent is the average length of your credit history, 10 percent is how much new credit you've applied for recently and the final 10 percent is your credit mix of credit types.

Significance

A refinance can change your credit score depending upon the specifics of your new loan. FICO measures how much credit you have in relation to your level of debt. This is called your credit utilization ratio. The more debt you have, the higher this ratio and the lower your score. When you refinance, you take out a new loan and the old loan balance goes to zero. If the new loan you receive is larger, which means you now have more debt, that will increase your credit utilization ratio and this will lower your score. How much your score changes will depend on the other information on your individual report.

Considerations

Refinancing also requires you to apply for the new loan and give lenders permission to access your credit report. Each time you apply for credit, a hard inquiry will appear on your credit report. If you apply to multiple lenders then you will have multiple new inquiries on your report. This can lower your credit score. Inquiries remain on your credit report for up to two years. When calculating your score, FICO only considers the inquiries from the last 12 months. FICO does make an exception for rate shopping. If you apply for multiple auto or mortgage loans within a short period of time, usually 2 weeks, FICO considers that as one inquiry.

Prevention/Solution

Errors on a credit report can lower your credit score. If you notice inquiries on your report that are older than two years, you have the right under the Fair Credit Reporting Act to file a dispute with the bureau to have them removed. Disputes are filed by mail, phone or online at the bureau's website. If you notice inquiries that you did not make, this could indicate identity theft and you should notify the credit bureau and request a fraud alert be placed on your file. The initial alert remains active for 90 days, or up to seven years if you submit an identity theft police report to the bureau.

Read More

Steps to Build Credit

Building credit is a gradual process that requires understanding how credit works and making wise financial decisions. Wrong choices and bad habits lead to a poor credit rating, which can reduce your chances of getting a home or car loan when you need one and make it harder to get a good interest rate.

Personal Loans

Start establishing a credit history by taking out a personal loan using your property as collateral. Visit your bank and talk to a loan officer about applying for a small personal loan using jewelry or other personal property as collateral. Rather than spend the money, deposit this cash into a savings account and then make monthly payments -- on time each month. This will start your credit report off on a positive note and help you establish a good payment history with your bank, which will open the door to other credit opportunities.

Retail Credit Cards

First-time credit applicants may not qualify for major bank cards. They use credit scores to determine eligibility; without a credit score, they can't assess your level of responsibility. Apply instead for a department store credit card. You can submit an application in the store, and these are easier to secure than major credit cards.

Sharing an Account

Piggybacking is the term used to describe adding another person to a credit account. Parents often help their children establish credit by adding them as an authorized user to their credit card. Talk to your parents to see if this is an option. Your spouse or a sibling would be another option.

Credit Patterns

Getting a credit card and applying for loans puts you on the right path. But to achieve a high credit rating, you've got to practice good habits. This includes making bill payments by their due dates to avoid late fees and negative remarks on your credit file. Most creditors and lenders have websites that allow you to manage your accounts online. Paying online and setting up automated monthly payments can help alleviate late payments. It's wise to pay off new credit card charges each month to keep your debt-to-income ratio low. If you can't pay them off each month, stay below 30 percent of your credit limit because the amount of credit used -- not just the number of cards -- affects your credit rating.

Credit Reports

Creditors report your payment history to the credit bureaus. Once you've established credit, you should check your credit report to ensure accuracy. Annual Credit Report (see Resources section) gives consumers one free report a year from each of the bureaus. Monitor your report regularly to catch mistakes early and recognize signs of identity theft. According to CBS News, about 80 percent of credit reports have errors. Some mistakes are minor and may not affect credit scores. But if your report contains mistakes such as unknown collection accounts, liens or judgments, these remarks can reduce your score.

Read More