• What is your credit history ?
• Good credit versus negative credit
• What is a credit report?
• Your rights
• How do I get my credit report ?
• Why was my credit application denied ?
• What if my credit application is denied ?
• How can I establish good credit
• 'Unsecured' credit cards
• Optional credit card services
• Where to complain

What Is Your Credit History?
When you ask for a loan or apply for a credit card, lenders look at your "credit history" to see how reliable you have been in repaying loans or credit. If you've never been granted credit, such as a credit card, store account, car loan or mortgage, you may not have a credit history.

Good credit can help you:

• Buy a home.
• Get a job.
• Set up telephone, gas and electric, water or heating oil accounts
• Rent an apartment.
• Buy "big ticket" items (furniture, electronics or appliances) without paying cash.
• Finance a car.
• Qualify for insurance coverage.
• Borrow money.
• Obtain a credit card.

Good Credit Versus Negative Credit
If you have had credit cards or loans and made all required payments on time, you probably have a good credit history. A positive credit record results from using credit wisely.

People with good credit have:

• Established credit by borrowing money or using a credit card.
• A proven record of making at least the minimum payments on time-by the due date-and staying within their credit limits.
• Only obtained loans or credit cards that they are capable of paying back. (Don't overextend yourself-apply for only the credit you can afford.)

• Late payments.
• Paying less than the minimum.
• Having too many credit cards with large balances or large amounts of available credit-even if you make on-time payments.
• Overdue accounts that have been referred to a collection agency.
• Declaring bankruptcy.
• Having court-ordered withdrawals from your paycheck to pay debts (garnishment).

What Is A Credit Report?

Your credit report is a record of your loans, credit cards, payments and outstanding debts. The information is supplied by companies that have given you credit or loaned you money (lenders).

Lenders give regular reports about your credit accounts to companies called credit reporting bureaus. These companies are in the business of collecting information about consumers from lenders such as banks, savings and loans, credit unions, finance companies and stores). Credit reporting bureaus keep this information in computer databases and provide it to lenders when you apply for a new credit card or loan. Credit reporting bureaus do not make lending decisions.

When you apply for a credit card or loan, lenders use your credit report to decide if you are responsible enough to handle additional credit.

Your credit report contains:

• Current and past payment information-whether your payments have been on time or late.
• Outstanding balances-the balances on your credit cards and the amounts of your outstanding loans.
• Information about you from public records, such as a bankruptcy or overdue property taxes.
• Overdue child support payments.
• The names of everyone who recently asked for a copy (inquiries).

• Information about your race, religion, political party, medical history, lifestyle, background or criminal record.

Your Rights

The Fair Credit Reporting Act is a federal law that regulates credit reporting bureaus and prohibits inaccurate or obsolete information from being reported in credit files.

You have a right to get a copy of your credit report any time, but you may be charged a fee. When you receive it, carefully check all the information, including all account numbers and payment records. Make sure that old accounts you closed are listed properly with the words "closed at the consumer's request."

You have the right to correct errors in your credit report. Enclosed with your credit report will be a form or letter explaining what to do if you find inaccurate information or items you do not agree with. Always dispute inaccurate information.

After you begin the dispute process, the credit bureau must check with the source of the information and send you an update. It must respond to your dispute in a timely way. In most cases, you should receive a response in 30 to 45 days.

If, after hearing from the bureau, you disagree with its response, you can add up to a 100-word statement to your credit report giving your side of the story.

How Do I Get My Credit Report?
Because of a law passed in 2004, you can get a free copy of your credit report once per year from each of the three major credit reporting bureaus through the website www.annualcreditreport.com and additional information can be received from the credit bureaus directly.

• Equifax
  P.O.Box 105496
  Atlanta, GA 30348
  www.equifax.com
  1-800-685-1111



• Experian
  P.O. Box 9556
  Allen, TX 75013
  www.experian.com
  1-888-397-3742



• TransUnion
  Consumer Disclosure Center
  P.O. Box 1000
  Chester, PA 19022
  www.transunion.com
  1-800-888-4213

• Full name, including your middle initial and suffix (Jr., Sr. or III) if applicable.
• Current address and previous addresses for two to five years, depending on the bureau.
• Social Security number.
• Date of birth.
• Current employer.
• Phone number.

Why Was My Credit Application Denied?
Many people who apply for credit are denied. If this happens, the lender must tell you why your application was denied. In most cases, the denial will be for one of the following reasons:

You have no credit history.
If you've never had credit, if you've just begun to use credit or if you haven't used credit recently, lenders may deny you credit because you do not have a credit history. Without this information, lenders are less able to determine if you are a good credit risk.
If you've never had credit, or haven't used credit in a long time, you can begin to build a credit history. (See "How can I establish good credit?")

You have too much outstanding credit.
Lenders are reluctant to give you new credit if you already have a large amount of outstanding credit. When lenders evaluate your application, they consider your income, current credit limits (if available) and debt payments to decide how much debt you can pay. Lenders often imagine the worst case scenario-if you suddenly used all your credit accounts up to the limits, would your income cover the payments? If the answer is no, your application might be rejected.

You did not handle credit responsibly in the past.
Have you been granted credit but did not handle it appropriately? If you made payments late, did not pay back a loan or filed for bankruptcy, lenders will not want to give you a new credit card or loan. To improve your credit report, you must settle old debts and make on-time payments for months, even years, before you will again be considered a good credit risk.

You are a victim of fraud.
A dishonest person may try to set up credit in your name. Some people only find out they are victims when they apply for credit and are denied. You are not responsible, but it will be hard to prove you are a good credit risk until you clear your name.
One way to guard against this kind of fraud is to check your credit report at least once a year. If you find any accounts you do not recognize, call the credit bureau's fraud department immediately. To prevent fraud, keep a close eye on your credit cards and billing statements.

What if my credit application is denied ?

The lender's explanation of why your application was denied will also tell you which credit reporting bureau supplied your credit report.

• If you've been turned down, you are entitled to a free copy for up to 60 days. Contact the credit reporting company by telephone to get one.
• If you've never had credit and the reason for the denial is insufficient credit history, contacting the reporting bureau won't help you.
• After reviewing your report, if you feel a mistake has been made, contact the credit reporting bureau. You have a right to point out any inaccurate information in your credit report and to dispute it. The dispute process is simple-it usually can be done by calling the customer service number given on your credit report.
• The credit reporting agency will contact the creditor who supplied negative or inaccurate information about you. Meanwhile the disputed information will be removed from your credit report, but it might be put back on if the lender tells the bureau it is accurate.
• If that happens, you have the right to add up to a 100-word explanation to your credit report giving your side of the story. When you apply for credit, lenders may consider your statement.

How can I establish good credit ?
Below are three ideas for establishing credit. If you are successful in establishing an account, and use it responsibly for a year or two, you will begin to build a good credit history.

1. Ask local companies for credit. Try your bank, credit union or a local department store. But make sure that the company sends the information on your credit account to one or more credit reporting bureaus so that it will help you establish a credit history.
2. Find a co-signer. Ask a relative or friend with good credit to co-sign your credit application. A co-signer promises to pay if you don't. If you don't make payments on time, the co-signer will be responsible for the loan. By failing to pay, you could damage your relative's or friend's credit.
3. Get a secured credit card. A secured credit card is a bank credit card backed by money you deposit in a bank account. If you don't pay off your credit card bill, the money in your account may be used to cover that debt.

• A low annual fee.
• No up-front application, processing or membership fees.
• An interest-bearing account for your deposit.

'Unsecured' Credit Cards

Many companies offer unsecured credit cards for people with no credit history or damaged credit. These can be expensive credit options, because many of them have:

• Low credit lines.
• High interest rates.
• Up front application, processing, and reservation fees, usually charged to your first statement.
• Annual or monthly membership fees.
• A fee for line-of-credit increases.

Optional Credit Card Services
Your credit card company may offer you services and products for a fee:

• Credit insurance-a service that helps pay your monthly minimum payments for a short time if you become ill or disabled.
• Credit monitoring services that charge to watch your credit report and let you know about any negative changes.
• Magazines and coupon books.

Where To Complain
To complain about a credit bureau, department store or other non-FDIC (Federal Deposit Insurance Corporation) insured financial institution, write to the Consumer Response Center, Federal Trade Commission (FTC), Washington, DC 20580. You may also file a complaint online at the FTC web site (www.ftc.gov).

To complain about a lender or credit card company, call the company and ask for the name and address of its regulatory agency. Send your complaint letter there, and forward a copy to your state Attorney General.
This publication was created by Consumer Action in partnership with Capital One Services, Inc. @ Consumer Action 2004

Copyright
@ 2004 Consumer Action. Rights Reserved.