This article examines the importance of a good credit rating, accurate
credit reports, discrimination, debt collection rules, and credit
problems. It provides suggested actions for various situations, and how to get credit reports.

This information was developed and published by the Federal Trade Commission.

Credit and Your Consumer Rights

A good credit rating is very important. Businesses inspect your credit
history when they evaluate your applications for credit, insurance,
employment, and even leases. They can use it when they choose to give
or deny you credit or insurance, provided you receive fair and equal
treatment. Sometimes, things happen that can cause credit problems: a
temporary loss of income, an illness, even a computer error. Solving
credit problems may take time and patience, but it doesn’t have to be
an ordeal.

The Federal Trade Commission (FTC) enforces the credit laws that
protect your right to get, use and maintain credit. These laws do not
guarantee that everyone will receive credit. Instead, the credit laws
protect your rights by requiring businesses to give all consumers a
fair and equal opportunity to get credit and to resolve disputes over
credit errors. This brochure explains your rights under these laws and
offers practical tips to help you solve credit problems.

Your Credit Report

Your credit report contains information about where you live, how you
pay your bills, and whether you’ve been sued, arrested, or filed for
bankruptcy. Consumer reporting companies sell the information in your
report to businesses that use it to evaluate your applications for
credit, insurance, employment, or renting a home.

The federal Fair Credit Reporting Act (FCRA) promotes the accuracy and
privacy of information in the files of the nation’s consumer reporting
companies. Under the Fair Credit Reporting Act:

You have the right to receive a copy of your credit report. The copy of
your report must contain all the information in your file at the time
of your request.
Each of the nationwide consumer reporting companies – Equifax,
Experian, and TransUnion – is required to provide you with a free copy
of your credit report, at your request, once every 12 months. The
companies are rolling this out across the country during a nine-month
period. By September 2005, consumers from coast to coast will have
access to a free annual credit report if they ask for it. For details,
see Your Access to Free Credit Reports at ftc.gov/credit.
Under federal law, you’re also entitled to a free report if a company
takes adverse action against you, like denying your application for
credit, insurance, or employment, and you ask for your report within 60
days of receiving notice of the action. The notice will give you the
name, address, and phone number of the consumer reporting company.
You’re also entitled to one free report a year if you’re unemployed and
plan to look for a job within 60 days; if you’re on welfare; or if your
report is inaccurate because of fraud, including identity theft.
Otherwise, a consumer reporting company may charge you up to $9.50 for another copy of your report within a 12-month period.
You have the right to know who asked for 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, provided
the denial was based on information given by the consumer reporting
company.
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). Both the consumer reporting company and
the information provider are obligated to investigate your claim, and
responsible for correcting inaccurate or incomplete information in your
report. For details, see How to Dispute Credit Report Errors at
ftc.gov/credit.
You have a right to add a summary explanation to your credit report if
your dispute is not resolved to your satisfaction. You also can ask the
consumer reporting company to provide your statement to anyone who
received a copy of your report in the recent past. You can expect to
pay a fee for this service.
Your Credit Application

When creditors evaluate a credit application, they cannot engage in discriminatory practices.

The Equal Credit Opportunity Act (ECOA) 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.

The ECOA protects consumers who deal with companies that regularly
extend credit, including banks, small loan and finance companies,
retail and department stores, credit card companies, and credit unions.
Everyone who participates in the decision to grant credit, including
real estate brokers who arrange financing, must follow this law.
Businesses applying for credit also are protected by this law. Under
the Equal Credit Opportunity Act:

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.
If you are denied credit, you have a legal right to know why.
For details, see Equal Credit Opportunity at ftc.gov/credit.

Your Credit Billing and Electronic Fund Transfer Statements

It is important to check credit billing and electronic fund transfer
account statements regularly because these documents may contain
mistakes that could damage your credit status or reflect improper
charges or transfers. If you find an error or discrepancy, notify the
company and dispute the error immediately. The Fair Credit Billing Act
(FCBA) and Electronic Fund Transfer Act (EFTA) establish procedures for
resolving mistakes on credit billing and electronic fund transfer
account statements, including:

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 generally applies only to “open end” credit accounts – credit
cards and revolving charge accounts, like department store accounts. It
does not apply to loans or credit sales that are paid according to a
fixed schedule until the entire amount is paid back, like an automobile
loan. The EFTA applies to electronic fund transfers, like those
involving automatic teller machines (ATMs), point-of-sale debit
transactions, and other electronic banking transactions.

For details, see Fair Credit Billing and A Consumer’s Guide to E-Payments at ftc.gov/credit.

Your Debts and Debt Collectors

You are responsible for your debts. If you fall behind in paying your
creditors, or if an error is made on your account, you may be contacted
by a “debt collector.” A debt collector is any person, other than the
creditor, who regularly collects debts owed to others, including
lawyers who collect debts on a regular basis. You have the right to be
treated fairly by debt collectors.

The Fair Debt Collection Practices Act (FDCPA) applies to personal,
family, and household debts. This includes money you owe for the
purchase of a car, for medical care, or for charge accounts. The FDCPA
prohibits debt collectors from engaging in unfair, deceptive, or
abusive practices while collecting these debts. 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.
For details, see Fair Debt Collection at ftc.gov/credit.

Solving Your Credit Problems

Your credit report can influence your purchasing power, as well as your
opportunity to get a job, rent or buy an apartment or a house, and buy
insurance. When negative information in your report is accurate, only
the passage of time can assure its removal. 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. There is no time
limit on reporting information about criminal convictions; information
reported in response to your application for a job that pays more than
$75,000 a year; and information reported because you’ve applied for
more than $150,000 worth of credit or life insurance. There is a
standard method for calculating the seven-year reporting period.
Generally, the period runs from the date that the event took place.

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 to
the appropriate company and send your letter “return receipt
requested.”
When you dispute a billing error, include your name, account number,
the dollar amount in question, and the reason you believe the bill 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. Resolving credit problems can take time and patience.
There is nothing that a credit repair company can charge you for that you cannot do for yourself for little or no cost.
If you’re not disciplined enough to create a workable budget and stick
to it, work out a repayment plan with your creditors, or keep track of
mounting bills, consider contacting a credit counseling organization.
Many credit counseling organizations are nonprofit and work with you to
solve your financial problems. But not all are reputable. For example,
just because an organization says it’s “nonprofit,” there’s no
guarantee that its services are free, affordable, or even legitimate.
In fact, some credit counseling organizations charge high fees, or hide
their fees by pressuring consumers to make “voluntary” contributions
that only cause more debt.

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.

For more information, see Knee Deep in Debt and Fiscal Fitness: Choosing a Credit Counselor at ftc.gov/credit.

The FTC works for the consumer to prevent fraudulent, deceptive and
unfair business practices in the marketplace and to provide information
to help consumers spot, stop, and avoid them. To file a complaint or to
get free information on consumer issues, visit www.ftc.gov or call
toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The
FTC enters Internet, telemarketing, identity theft, and other
fraud-related complaints into Consumer Sentinel, a secure, online
database available to hundreds of civil and criminal law enforcement
agencies in the U.S. and abroad.

March 2005