Monthly Archives: April 2007

The Laws that Govern Credit

There are three laws that concern all the different areas of credit in the US:

Fair Debt Collection Practices Act (FDCPA)

This is the most important law to be familiar with if you are being contacted by third party collection agencies. It sadly seems that more often than not, the representatives of collection agencies use extreme rudeness and overbearing behavior as a means of collecting debts – and so very often, they slip past rude and overbearing into illegal.

The FDCPA provides standards of behavior for debt collectors and requires them to provide certain information to debtors.

If you are being repeatedly called by a collection agency, ask for an address where you can send them mail. They must provide it to you. You can then sent a “cease and desist” letter requesting that they do not communicate with you by telephone and that all dealings be by mail.

Not only is this a tremendous stress relief, but it’s also an excellent way of documenting all of your communication with the collection agency. Telephone conversations are too difficult to track. But with a pile of letters, you can show a judge anything they’ve sent to you or you’ve sent to them.

You’re also not immediately at the mercy of anyone who calls you and says you owe them a debt. Unfortunately, even if you know that you owe $5,000 to State Bank, you simply cannot trust that the person calling you on the phone claiming to collect on that $5,000 is actually legitamately licensed to do so. Never just hand over your credit card or checking account number over the phone to a debt collector. It could be a scam. Always ask for an address, then send a letter requesting proof that you owe the alleged debt, and that this collection agency is authorized to collect this debt.

Fair Debt Collection Practices Act (FDCPA)

Fair Credit Reporting Act (FCRA)

The FCRA ensures that all of us have access to our own credit reports. It regulates who has “permissable purpose” to acquire copies of our credit reports and limits how long information can be reported. Additionally, the FCRA describes how a Credit Reporting Agency must handle disputes.

Fair and Accurate Credit Transactions Amendment (FACTA)

FACTA is an amendment to the FCRA passed in 2006 which gives all of us the right to free credit reports from each of the credit reporting agencies each year. Please see my post about free credit reports for more information.

Fair Credit Reporting Act (FCRA)

Fair and Accurate Credit Transactions Amendment (FACTA)

Fair Credit Billing Act (FCBA)

The FCBA required creditors to bill correctly and completely and is overseen by the Federal Trade Commission (FTC).

The law prohibits unauthorized charges against your accounts, charges that list the wrong date or the wrong amount, charges for goods and services that you either did not accept or did not receive as agreed. It also protects you against math errors, and the failure of the creditor to properly record payments or credits for returned items.

Additionally, as long as you notify a creditor of a new or changed address at least 20 days before the end of the billing period, the creditor must send all bills to your correct mailing address.

You’re also protected from having to pay for charges you are disputing. You dispute a charge by asking for an explanation or proof of purchase and claiming an error or requesting clarification of the charge. If the dispute is resolved in the creditor’s favor, you are still required to pay in full.

Fair Credit Billing Act (FCBA)

Also important: Health Insurance Portability and Accountability Act (HIPAA)

If you have debt resulting from medical bills, then you also need to know about HIPAA.

Health Insurance Portability and Accountability Act (HIPAA)

Beginning to Build Your Credit: Good Advice for Young Mavens

Over on the MyMint blog, there’s some great advice for young credit mavens to begin building a positive credit history.

How to Jump Start Your Credit History While You’re Young in Five Easy Steps gives some great tips for establishing a great credit rating while you’re still in college in preparation for future borrowing.

Good advice. Wish I’d read it 10 years ago.

What You Should Know About Free Credit Reports

The Fair and Accurate Credit Transactions Act (FACTA) was passed in 2003. Among its provisions was the right for consumers to receive one free copy of their annual credit report from each of the credit reporting agencies.

There is only one source of free credit reports: the Annual Credit Report Request Service. This service was created by the three credit reporting agencies to handle consumers’ requests for their free credit reports. You may request your free annual reports through their website, or by telephone or mail.

Web: www.annualcreditreport.com
Phone: (877) 322-8228
Mail: Annual Credit Report Request Service, PO Box 105281, Atlanta, GA 30348-5281

There are many other web sites and services claiming to offer free credit reports, but buyer beware. The others are often credit monitoring services that require you to enroll, fork over your credit card information before they provide your three “free” credit reports along with a 30-day free trial of their credit monitoring service that you’ll need to remember to cancel to avoid being charged. Still others are identity theives lying in wait of their next victim. So be a smart maven and use only the Annual Credit Report Request Service if you want your free credit reports.

Why free credit reports might be a bad idea

If you have purchased your credit reports and notice an error, you report that error to the credit reporting agency and by law, they have to resolve your dispute within 30 days.

If you obtained your credit reports for free, the credit reporting agencies are given an extra 15 days, or a total of 45 days, to resolve each dispute. This doesn’t sound like a big deal, but if your credit report is full of errors, then it can considerably lengthen the time it takes to get all of them resolved. Forty-five days instead of thirty is a 50% increase in the total time it will take to get things straightened out.

Keep that in mind. It might be worth saving the time and trouble by paying out a few bucks to get the reports. For $47.85 (as of today) you can purchase not only your three credit reports, but your real FICO scores based on all three reports from www.myFICO.com. Also note that myFICO.com is the only source for your actual credit scores. Several other companies, including the credit reporting agencies themselves, will claim to sell you your FICO score, but as the calculation method used by FICO is a secret, nobody but FICO can sell you the real number. Smart of them, right?

Step 1: Opting Out

Opting Out of Pre-Screened Credit Offers

From www.optoutprescreen.com:

Under the Fair Credit Reporting Act (FCRA), the Consumer Credit Reporting Companies are permitted to include your name on lists used by creditors or insurers to make firm offers of credit or insurance that are not initiated by you (“Firm Offers”). The FCRA also provides you the right to “Opt-Out”, which prevents Consumer Credit Reporting Companies from providing your credit file information for Firm Offers.

What does that mean?

You know those annoying “pre-approved” credit card offers that arrive in your mail almost daily? You can stop them. You can fill out the electronic opt-out form at www.optoutprescreen.com to opt out for five years. After five years, you’ll have to opt-out again. You can also permanently opt-out using a mail-in form and never worry about receiving annoying pre-screened credit offers again. This also lets the credit bureaus know that you are not open to receiving unsolicited offers.

What’s the value to my credit report?

Opting out won’t improve your credit scores or your credit rating. It won’t be reflected on your credit report in any way. Possibly, it will make your credit report and the information contained therein less valuable to the credit bureaus since they cannot generate income by selling your information. If your report is less valuable, there is a possibility that getting disputes resolved and misinformation removed will be easier for you.

Opting Out of Direct Marketing

Get your name and information further off the radar by following the advice and information provided by the Direct Marketing Association at www.dmaconsumers.org/consumerassistance.html. They offer advice and forms for getting yourself removed from mailing lists, email lists, and telephone lists. There is a $1 fee for processing your request to be removed from mailing lists, but it’s money well-spent.

Private information that cannot be sold or shared with others is useless information to these companies and they won’t waste space or memory by storing it. Additionally, think of all the paper you’ll save if you’re not receiving junk mail, think of all the time and frustration saved by avoiding annoying telemarketing calls, think how nice it would be to hit the delete key in your email a little less often.

Opting Out of Other Lists

Once you’ve prevented the credit bureaus and the direct marketers from sharing or using your personal information for their own gain, you have to make a list of the other companies and instutions that have your information. Start with financial institutions – anywhere that you have a checking account, savings account, CD, money market account, credit card, loan, mortgage, etc. You have to contact each one directly and ask them not to share your information with anyone.

Other companies that might be sharing or selling your information include mail-order companies, e-commerce sites where you have shopped, companies with whom you have registered a warranty or service plan, companies where you have a shopping club or discount card, your health club, the magazines you subscribe to and many, many others. Unfortunately, there’s no central place to remove yourself from these sell/share lists, so you have to contact each company individually.

Going forward, be sure to check the privacy policies on any websites that you use before you register for an account or make a purchase. Notify any telephone operators that you speak to that you would not like your information to be shared or sold. Mark the box to keep your information private when you fill out any type of form. Make sure that at every point, companies who have your personal information are aware that you do not want that information shared or sold.

Getting Started

I was irresponsible with my debt during college. I followed college graduation immediately with a messy and prolonged divorce. I followed that with years of acting like an ostrich with my head in the sand trying to just get through my life and ignoring the whole credit situation.

All of this adds up to a credit report so abominably bad that at 33, I cannot rent an apartment, buy a car, or get a charge card at my favorite clothing store, let alone buy a home of my own. I’ve struggled through somehow, but it’s getting ridiculous. Having bad credit puts up a lot of barriers to a good life. Every time I apply for a job, I get nervous when they make me sign the release allowing them to view my credit report.

Over the past few years, the state of my credit combined with my own ignorance about the proper way to handle the situation has led to some really ugly situations. Collection agencies calling me at work, making scary threats, calling me names, refusing to leave me alone, and ending with my job being in jeopardy because I was spending an hour in the bathroom crying everyday. If I’d only known then what I know now…if you’re in a situation like this, please learn your rights. Collection agencies are not allowed to harrass you endlessly, and if you send a letter to them asking them not to contact you by telephone, they are not allowed to call you any longer.

The situation is big and scary, but I know that I am far from being alone. I’m one of thousands of people with bad credit, who are being harrassed by collection agencies, who are being denied loans, jobs, and apartments. I’ve decided to share my experience, my mistakes, my successes and frustrations, in the hopes that it will help someone else too.

My best advice right now: stop being afraid. Take a few steps to learn the real boundaries of the problem. You’ll feel so much better when you see what it really is that you’re dealing with. No matter how bad it is, knowing exactly what the problem is will feel better than wondering and worrying.