FTC - APRIL 1996
Your credit report contains information about where you work and live and how you pay your bills. It also may show whether you've been sued or arrested or have filed for bankruptcy. Companies called credit reporting agencies (CRAs) or credit bureaus compile and sell your credit report to businesses. Because businesses use this information to evaluate your applications for credit, insurance, and employment, it's important that the information in your report is complete and accurate.
Getting Your Credit Report
If you've been denied credit, insurance, or employment because of information supplied by a CRA, the Fair Credit Reporting Act (FCRA) says the company you applied to must give you the credit agency's name and address. If you contact the agency for a copy of your report within 30 days of receiving a denial notice, the report is free.
If you simply want a copy of your report, call 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 one listed until you locate the agencies maintaining your file. Expect to pay a reasonable charge for each report.
Many of your rights under the FCRA will change September 30, 1997. A new brochure explaining these rights will be available from the FTC then.
Under the FCRA, you have the right to dispute the completeness and accuracy of information in your credit file. When you contact the reporting agency to dispute information in your report, the agency must reinvestigate and record the current status of the disputed items within a 'reasonable period of time,' unless they believe the dispute is 'frivolous or irrelevant.' If the credit reporting agency can't verify a disputed item, they must delete it.
If your report contains erroneous information, the CRA must correct it. If an item is incomplete, the CRA must complete it. For example, if your file shows that you were late in making payments on accounts, but fails to show that you are no longer delinquent, the CRA must correct the report to show that your payments now are current. Or if your file shows an account that belongs only to another person, the CRA would have to delete it. Also, if you request, the CRA must send a notice of correction to anyone who received your report in the past six months. Job applicants can have a corrected copy of their report sent to anyone who received a copy during the past two years.
If a reinvestigation doesn't resolve your dispute, the law allows you to file a statement of up to 100 words to explain your side of the story. The CRA must include the statement with every request for your report. CRA staff can help you prepare the statement.
Accurate Negative Information
Accurate negative information can stay on your report for 7 years; bankruptcies for 10 years. Also, any negative information may be reported indefinitely for use in the evaluation of your application for:
* $50,000 or more in credit;
* a life insurance policy with a face amount of $50,000 or more; or
* consideration for a job paying $20,000 or more.
Registering a Dispute
You must direct your dispute to the CRA. Although the FCRA doesn't require it, FTC staff recommend that you submit your dispute in writing, along with copies (NOT originals) of documents that support your position.
Your letter should include your complete name and address, clearly identify each item you dispute, explain why you dispute the information, and request deletion or correction. You may want to include a copy of your report with the items in question circled. Your letter may look something like the one at the end of this brochure.
Send your dispute letter by certified mail, return receipt requested, so you can document what the CRA received. Keep copies of your dispute letter and enclosures.
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 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.
MANAGING YOUR DEBTS: HOW TO REGAIN FINANCIAL HEALTH
Can't pay your bills? You're not alone. Today, millions of Americans are having difficulty paying their debts. Most of those in financial distress are middle income families with jobs who want to pay off what they owe.
But it is important for you to act. Doing nothing can lead to much larger problems in the future-even bigger debts, the loss of assets such as your house, and a bad credit record.
The good news is that there are solutions. The remedies provided in this brochure can help improve your relationships with creditors, reduce your debts, and help you manage your money. In brief, these solutions can help give you a new, fresh start.
Are You In Financial Trouble?
If bill collectors are calling you, you know you're in financial trouble. But what if you're just having difficulty stretching your paycheck to pay monthly bills? If you answer yes to any one of the following questions, you should act.
* Do you routinely spend more than you earn?
* Are you forced to make day-to-day purchases on credit?
* Are you able to make only the minimum payments on monthly credit card debts?
* If you lost your job, would you have difficulty paying next month's bills?
"With budgeting guidance, we now have peace of mind. We have learned a most valuable lesson about money management. Our future looks brighter." Linda R.
What You Can Do For Yourself
Review your specific obligations that creditors claim you owe to make certain you really owe them. If you dispute a debt, first contact the creditor directly to resolve your questions. If you still have questions about the debt, contact your state or local consumer protection office or state Attorney General.
Contact your creditors to let them know you're having difficulty making your payments. Tell them why you're having trouble- perhaps it's because you recently lost your job or have unexpected medical bills. Try to work out an acceptable payment schedule with your creditors. Most are willing to work with you and will appreciate your honesty and forthrightness.
The Fair Debt Collection Practices Law prohibits a debt collector from showing what you owe to anyone but your attorney, harassing or threatening you, using false statements, giving false information about you to anyone, and misrepresenting the legal status of your debts. Remember that under other federal laws to collect debts, creditors cannot seize most government assistance and can only garnish a portion of wages to collect debts.
Budget your expenses. Create a spending plan that allows you to reduce your debts. Itemize your necessary expenses (such as housing and health care) and optional expenses (such as entertainment and vacation travel). Stick to the plan.
Try to reduce your expenses. Cut out any unnecessary spending such as eating out and purchasing expensive entertainment. Consider taking public transportation rather than owning a car. Clip coupons, purchase generic products at the supermarket, and avoid impulse purchases. Above all, stop incurring new debt. Consider substituting a debit card for your credit cards.
Use your savings and other assets to pay down debts. Withdrawing savings from low-interest accounts to settle high-rate loans usually makes sense. Selling off a second car not only provides cash but also reduces insurance and other maintenance expenses.
Look for additional resources from governmental and private sources for which you may be eligible. Government assistance includes unemployment compensation. Aid to Families with Dependent Children (AFDC), food stamps, low-income energy assistance, Medicaid, and Social Security including disability. Other resources may be available from churches and community groups. Often these sources are listed in the Yellow Pages of your phone book.
"Looking closely at our options helped us realize that we still needed to try self-budgeting before taking more extreme measures. We think that perhaps we were giving up too soon." Alicia A.
What Others Can Do For You
Credit Counseling. If you are unable to make satisfactory arrangements with your creditors, there are organizations that can help. An organization that you can call is a Consumer Credit Counseling Service (CCCS) agency. These local, non-profit organizations affiliated with the National Foundation for Consumer Credit (NFCC) provide education and counseling to families and individuals.
For consumers who want individual help, CCCS counselors with professional backgrounds in money management and counseling can provide support. To promote high standards, the NFCC has developed a certification program for these counselors. A counselor will work with you to develop a budget to maintain your basic living expenses and outline options for addressing your total financial situation. If creditors are pressing you, a CCCS counselor can also negotiate with these creditors to repay your debts through a financial management plan.
Under this plan, creditors often agree to reduce payments, lower or drop
interest and finance charges, and waive late fees and over-the-limit fees. After starting the plan, you will deposit money with CCCS each month to cover these new negotiated payment amounts. Then CCCS will distribute this money to your creditors to repay your debts. With more than 1,100 locations nationwide, CCCS agencies are available to nearly all consumers. Supported mainly by contributions from community organizations, financial institutions, and merchants, CCCS provides services free or at a low cost to individuals seeking help. To contact a CCCS office for confidential help, look in your telephone directory white pages, or call 1 (800) 388-2227, 24 hours a day, for an office near you.
"I cannot tell you how happy I am to finally to able to control my finances now that I have followed a budget. So far, so good. I actually have a balance in my savings account!" Rodney O.
Personal Bankruptcy. Bankruptcy is a legal procedure which can give people who cannot pay their bills a fresh start. A decision to file for bankruptcy is a serious step. You should make it only if it is the best way to deal with financial problems.
There are two types of bankruptcy available to most individuals. Chapter 13 or "reorganization" allows debtors to keep property which they might otherwise lose, such as a mortgaged house or car. Reorganizations may allow debtors to pay off or cure a default over a period of three to five years, rather than surrender property.
Chapter 7 or "straight bankruptcy" involves liquidation of all assets that are not exempt in your state. The exempt property may include items such as work-related tools and basic household furnishings, among others. Some of your property may be sold by a court-appointed official or turned over to your creditors. You can file for Chapter 7 only once every six years.
Both types of bankruptcy may get rid of unsecured debts (those where creditors have no rights to specific property), and stop foreclosures, repossessions, garnishments, utility shutoffs, and debt collection activities. Both types also provide exemptions that permit most individual debtors to keep most of their assets, though these "exemption" amounts vary greatly from state to state.
Bankruptcy cannot clean up a bad credit record and will be part of this record for up to ten years. It can, for example, make it more difficult to get a mortgage to buy a house. It usually does not wipe out child support, alimony, fines, taxes, and some student loan obligations. Also, unless under Chapter 13 you have an acceptable plan to catch up on your debt, bankruptcy usually does not permit you to keep property when the creditor has an unpaid mortgage or lien on it.
Bankruptcy cases must be filed in federal court. The filing fee is $160, which sometimes may be paid in installments. This fee does not include the fees of your bankruptcy lawyer.
Choosing a bankruptcy lawyer may be difficult. Some of the least reputable lawyers make easy money by handling hundreds of bankruptcy cases without adequately considering individual needs. Recommendations from those you know and trust, and from employee assistance programs, are most useful.
Some public-funded legal services programs handle bankruptcy cases without charging attorney fees. Or these programs may provide referrals to private bankruptcy lawyers. Keep in mind that the fees of these attorneys may vary widely.
"Our bills have been a source of worry to us. After bringing our problem to credit counselors, we have begun to feel there is a way to cope with it. We are feeling more confident now." Nelson M.
Credit counselors who aren't helpful. Often for-profit or non- credentialed counseling organizations make promises that they cannot or do not keep. Be especially careful when asked for a large sum of money in advance. To check the organization's reputation, contact your state Attorney General, consumer protection agency, or Better Business Bureau.
"Credit repair" clinics and "credit doctors" have been frequently criticized for promising that they can remove negative information from your credit report. But accurate information cannot be changed. If information is old or inaccurate, you can contact a credit bureau yourself and ask that it be removed.
Risky refinancing options. When already in financial trouble, second mortgages greatly increase the risk that you may lose your home. Be wary of any loan consolidations or other refinancing that actually increase interest owed or require payments of points or large fees.
A Final Word: Don't lose hope, even if you despair of ever recovering financially. You can regain financial health if you act. Pursuing the options presented in this pamphlet can put you on the road to financial recovery.
"It feels great to be getting my life (and credit) in order!" Robyn H.
The following organizations and individuals worked together in the preparation of this pamphlet and endorse its content.
American Association of Retired Persons
Consumer Federation of America
National Consumer Law Center staffers
National Foundation for Consumer Credit
U.S. Consumer Information Center
U.S. Office of Consumer Affairs