YOUR CREDIT RATING

A good credit rating is very important. Businesses inspect your credit history when they evaluate your applications for credit, insurance, employment, and even leases. Based on your credit payment history, businesses can choose to grant or deny you credit 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. Your credit score takes into consideration several categories of information, not just one or two. No one piece of information or factor alone will determine your credit score.

The importance of any factor depends on the overall information in your credit report. For some people, a given factor may be more important than for someone else with a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your credit score. It's impossible to say exactly how important any single factor is in determining your score - even the levels of importance shown here are for the general population, and will be different for different credit profiles. What's important is the mix of information, which varies from person to person.

Lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting.

Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will increase your credit score.

Your credit score fluctuates in response to financial decisions you make. You'll need to know how the actions you take today will affect your score tomorrow.  Credit scores are calculated from various data in your credit report. This data can be grouped into five categories as outlined below.

Payment History

Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)

·                     Presence of adverse public records (bankruptcy, judgements, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)

·                     Severity of delinquency (how long past due)

·                     Amount past due on delinquent accounts or collection items

·                     Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any)

·                     Number of past due items on file

·                     Number of accounts paid as agreed

Amounts Owed

·                     Amount owing on accounts

·                     Amount owing on specific types of accounts

·                     Lack of a specific type of balance, in some cases

·                     Number of accounts with balances

·                     Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)

·                     Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)

Length of Credit History

·                     Time since accounts opened

·                     Time since accounts opened, by specific type of account

·                     Time since account activity

New Credit

·                     Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account

·                     Number of recent credit inquiries

·                     Time since recent account opening(s), by type of account

·                     Time since credit inquiry(s)

·                     Re-establishment of positive credit history following past payment problems

Types of Credit Used

Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)

YOUR RIGHTS UNDER THE FAIR CREDIT REPORTING ACT

The Federal Trade Commission (FTC) enforces credit laws that protect your right to obtain, 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 receive 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 payment history is recorded in a file or report. These files or reports are maintained and sold by "consumer reporting agencies" (CRAs). One type of CRA is commonly known as a credit bureau. You have a credit record on file at a credit bureau if you have ever applied for a credit or charge account, a personal loan, insurance, or a job. Your credit record contains information about your income, debts, and credit payment history. It also indicates whether you have been sued, arrested, or have filed for bankruptcy.

The Fair Credit Reporting Act (FCRA) is designed to help ensure that CRAs furnish correct and complete information to businesses to use when evaluating your application.

•        You have the right to receive a copy of your credit report. The copy of your report must contain all of the information in your file at the time of your request.

•        You have the right to know the name of anyone who received your credit report in the last year for most purposes or in the last two years for employment purposes

•        Any company that denies your application must supply the name and address of the CRA they contacted, provided the denial was based on information given by the CRA.

•        You have the right to a free copy of your credit report when your application is denied because of information supplied by the CRA. Your request must be made within 60 days of receiving your denial notice.

•        If you contest the completeness or accuracy of information in your report, you should file a dispute with the CRA and with the company that furnished the information to the CRA. Both the CRA and the furnisher of information are legally obligated to reinvestigate your dispute.

You have a right to add a summary explanation to your credit report if your dispute is not resolved to your satisfaction.

Your Credit Application

When creditors evaluate a credit application, they cannot lawfully 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 may not use it to discriminate 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.

Your rights 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.


Your Credit Billing and Electronic Fund Transfer Statements

It is important to check credit billing and electronic fund transfer account statements regularly. 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 contest 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 amount or date;

•        Computation or similar errors;

•        Failure to reflect payments, credits, or electronic fund transfers properly;


•        Not mailing or delivering credit billing statements to your current address, as long as that address was received by the creditor in writing at least 20 days before the billing period ended;

•        Charges or electronic fund transfers for which you request an explanation or documentation, due to a possible error.

The FCBA generally applies only to "open end" credit accounts — credit cards, revolving charge accounts (such as department store accounts), and overdraft checking 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, such as an automobile loan. The EFTA applies to electronic fund transfers, such as those involving automatic teller machines (ATMs), point-of-sale debit transactions, and other electronic banking transactions.

Your Debts and Debt Collectors

You are responsible for your debts. If you fall behind in paying your creditors or 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. This includes 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 owed 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.


www.ftc.gov