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Frequently Asked Questions (FAQS);faqs.216



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Archive-name: consumer-credit-faq/part4
Last-modified: 21 Oct 1992


This FAQ (Frequently Asked Questions) list should be a repository of the
canonical "best" answers.  If you know a better answer or a change that
improves an answer, please tell me!  (Use email, please.  Traffic in
this group is high, and I might miss a relevant posted article.)

                      Steve Adams, SPSS, Inc., Chicago, IL, USA
                                                        [e-mail]

Because this list is quite long, I am posting it in four parts:
    part 1 of 4: detailed contents and introduction
    part 2 of 4: credit cards
    part 3 of 4: credit cards continued
    part 4 of 4: credit reports (this file)
Please read the disclaimers, acknowledgements, and general information
in part 1.  (The most important disclaimer is that I am not a lawyer and
this file is not to be construed as legal advice.)

Some helpful free pamphlets are available from the FRB.  You can call
[phone] or write to Federal Reserve Bank of Philadelphia, Public
Information/Publications, P O Box 66, Philadelphia PA 19105-0066, for
these among others:

    - Your Credit Rating
    - Applying for Credit and Charge Cards
    - How To Establish and Use Credit

See part 1 of this FAQ list to obtain a catalog of FRB publications.


section 7.  Credit bureaus and your credit rating
=================================================
The U.S. Fair Credit Reporting Act of 1971 governs credit bureaus.
Alas, consumer protections are not as strong in credit reporting as in
credit billing (part 2 of 3 in this FAQ list).

Q701. What is "the credit bureau"?

    There are three big ones:  TRW, Equifax, and Trans Union, all with
    national databases.  Most credit grantors report to one or more of
    them.  In general, the credit bureaus don't pass information back
    and forth to each other.  So actually you have three credit
    histories, not one.

    There are also local credit bureaus and reporting agencies.  They're
    nowhere near as widespread as the big three.  However, they are also
    subject to the Fair Credit Reporting Act, so anything said here will
    apply to them too.

    A brochure titled "Understanding Credit Bureaus," outlining all the
    basics and your rights, is available for $1 [check or money order]
    from Bankcard Holders of America, 560 Herndon Pkwy, Suite 120, Herndon,
    VA, 22070.

Q702. Who assigns my credit rating?

    You don't have a credit rating, as such.  Each credit bureau
    collects information from banks, finance companies, department
    stores, taxing authorities, landlords, and other "credit grantors"
    and keeps the information in your file.  The file is supposed to be
    an objective record of your credit history, in essence a sorted copy
    of information furnished to the credit bureau by companies you have
    done business with on credit.

    The credit history shows your name, address, Social Security number
    and birth date; your open accounts, with balances and credit limits;
    whether you pay them on time or not; whether any of them are or were
    turned over for collection; any suits, judgments, or tax liens; and
    so on.  It may also include, according to {Your Credit Rating}, your
    employer, position, and income; your former address and former
    employer; your spouse's name, SSN, employer, and income; and whether
    you rent or own your home.

    That's the official story.  However, according to the November 1991
    {Consumer Reports}, the attorney general of New York State has
    charged that TRW maintains a secret numerical scale of (TRW's
    opinion of) each consumer's credit worthiness.  (I can verify this
    because a person who is very close to me and whom I trust completely,
    has confirmed it to be true, upon guarantee of anonimity.)  Credit
    grantors who pay extra (which is 30% of them) see that score besides
    the factual information.  Consumers are not told their scores, according
    to a TRW spokeswoman, "because it wouldn't mean anything to the
    consumer."  The scale, according to my source, is on a 1 to 1000
    rating, where the number represents the pro-mille chance of default.
    Seems understandable to me.

    Latest reports have TRW dropping this rating, but I have not been able
    to confirm this with my previous source.

Q703. How long does it take for an event (positive or negative) to show
      up on my credit report?

    Suppose you've just paid off a large loan and you're applying for a
    car loan or a mortgage.  It would be nice to know that the lender
    who pulls your report will see that the old loan paid was off okay.

    However:  Credit grantors' contracts with credit bureaus may or may
    not specify a timetable for grantors to report new information to
    the bureau.  If the credit grantors are tardy there's not much the
    credit bureau can or will do, since those same credit grantors are
    also the customers of the credit bureau.  Also, credit bureaus may
    gather information directly from public records, on any schedule
    they please.

    The answer to this Q, as a practical matter, is that there's no time
    limit that you can enforce for information to show up.  In fact, you
    don't have a legal right to insist on any report being made at all.
    (You can get false items corrected, but you can't legally insist on
    omitted information being added.) If you've actually paid off a debt
    that is reported as still unpaid, about all you can do is go through
    the procedure in section 9, "Fixing your credit report," for
    challenging incorrect information.

    Note that you can certainly provide the credit grantor with documents
    that show the loan was repaid.  I did this at the time of my mortgage
    with two accounts that showed as 'open.'

Q704. How does a lender decide whether to grant a loan?

    When you apply for a mortgage, credit card, or other loans, the fine
    print on the application gives the lender permission to check your
    credit history.  The lender usually requests a credit report from
    one of the big three credit bureaus.  The bureaus supposedly just
    report the raw data and don't assign you any kind of "credit
    rating." The lender looks at the report and decides whether to grant
    you the credit you are asking for.

    In general, lenders look at your total outstanding loans (e.g., your
    credit card balances).  They also look at your credit limits to see
    how far in debt you could go if you max out with your existing
    accounts.  Naturally, they are concerned with your record of
    delinquencies, accounts paid satisfactorily, and anything else that
    suggests how good a credit risk you might be.

    Where do the credit bureaus get the information on your credit
    report?  Much of it is reported to them by lenders.  Bureaus may
    also copy bankruptcies, judgments, repossessions, and delinquent taxes
    from public records.

    See also "Should I apply," below, the last paragraph of "Who assigns
    my credit rating?" above, and "What are 'inquiries' on my credit
    report" in section 8, "Getting and reading your credit report."

Q705. Should I apply for as many credit cards and charge accounts as
      possible, even if I won't use most of them right away?

    This may create a problem -- actually, two problems.

    Many lenders look at your total credit limit on each account to
    determine whether they want to give you additional credit.  If you
    have ten Visa cards with a $5000 limit on each, and five have a zero
    balance and the other five have $100 each, your actual debt is $500.
    Some lenders may evaluate you on the basis of $50,000 of debt
    because you could go out tomorrow and charge that much.

    Merely applying for many accounts can also create a problem; see
    "What are 'inquiries' on my credit report" in section 8, "Getting
    and reading your credit report."

Q706. I was refused a loan or credit card.  What can I do?

    If the lender's decision was based on a report from a credit bureau,
    by law the lender must tell you this and give you the name and
    address of the credit bureau.  This is true even if the credit
    report was only one factor in the decision.

    Write to the credit bureau.  State that you were denied credit,
    insurance, or employment by (name) on (date) based on a report from
    them, and you want a copy of your report.  By law the credit bureau
    must give you a free copy if you request it within 30 days after you
    were turned down based on a report from that credit bureau.  (It
    doesn't matter whether you have already received other free reports.)
    Also, free reports are available under certain circumstances at certain
    intervals from some of the credit bureau.  For example, TRW offers
    one free copy per year.

    If you provide some extra information with your request, you may get
    a more extensive report:  other forms of name you have used (such as
    maiden name and Jr.); current and previous addresses for the past
    five years; Social Security number.

    For what to do next, please see sections 8, "Getting and reading
    your credit report," and 9, "Fixing your credit report."

Q707. One lender refused my loan, but another one said it was fine.  How
      can this be?

    There are two possible reasons.  First, they may have been looking
    at reports from two different credit bureaus.  A lender where you
    had a problem might have sent a report to one of those credit
    bureaus but not the other.  Second, lenders have different criteria.
    Even when looking at the same report, they might reach different
    decisions.

Q708. I'm planning to apply for a loan, and I'd like to know up front
      that my credit is clean.  What can I do?

    If you can, find out in advance which credit bureau your lender will
    be using.  Then you can order just that one bureau's report rather
    than buying all three of them.

    Please see section 8, "Getting and reading your credit report," for
    further information.

Q709. How long do negative items stay on my report?

    Personal bankruptcies (ie Chapter 7) may be reported for ten years;
    most other kinds of information for seven years.  But there's a huge
    loophole: the time limits don't apply when you're applying for life
    insurance or credit of $50,000 or more, or when you're being
    investigated by a prospective employer for a job paying $20,000 a year
    or more.  (Yes, twenty thousand.)  Source:  {Your Credit Rating},
    rev 1/87.


section 8. Getting and reading your credit report
=================================================

Q801. How much does my credit report cost?

    There are no Federal laws limiting the price, though some state laws
    do.  As of August 1992, Equifax was charging an average of $8,
    depending on state of residence.  Trans Union was charging an average
    of $15.00, using the same criteria.  TRW, after the first free report,
    was charging and average of $7.50.
    [As reported in the Chicago Tribune, August 6, 1992, Sec 3, Page 3]

    Sometimes you can get your report for free.  See the next Q.

Q802. Can I get a free copy of my own credit report?

    You can get a free copy of a report if the lender used that report
    to help decide to turn you down for credit, employment, or insurance
    within the last 30 days.  See "I was refused a loan" in section 7,
    "Credit bureaus and your credit rating." To its credit, TRW extends
    that period to 60 days.  Equifax and TRW will accept phone requests
    in this case only; see "Can I phone in my request," below.

    If you haven't recently been turned down, the answer is less clear:

    - TRW will provide one complimentary report per year.  This is the
      result of a consent decree that settled lawsuits by 14 states.

    - Equifax and Trans Union are not under any legal obligation to
      provide free routine reports to consumers, but it appears they may
      be doing it anyway.  If they do ask for a fee, you have no legal
      complaint.

      Anecdotal evidence suggests that both Equifax and Trans Union
      will provide free reports, but this is not always the case.
      From evidence received from email correspondants and personal
      attempts, sometimes it works, sometimes it doesn't.  You can send
      a request with your address and SSN to all three bureaus with the
      request "Please send me a copy of my credit report" -- no money, no
      statement of having been denied credit, and see what happens.

Q803. Can I phone in my request?

    Here is current status as of 2 May 1992:

    - Equifax:  call [phone].  This voice mail system will take
      your request if you were denied credit, employment, or insurance
      within the last 30 days based on an Equifax report.  Otherwise, it
      will quote a price and tell you how to write for a copy of your
      report.

    - Trans Union:  mail requests only, as far as I know.  (The phone
      book says their main corporate number is [phone], but I
      haven't called.) {Newsweek} advises checking local yellow pages
      under "credit reporting agencies" for phone numbers.

    - TRW:  call [phone].  This voice mail system talks to you in
      Spanish or English.  It will let you record your request if you
      were turned down for credit, employment, or insurance within the
      last 30 days based on a TRW report.  Otherwise, it will quote a
      price and tell you how to write for a copy of your report.

    Caution:  if your phone request gets lost, you'll have to write
    anyway.  If your letter is later than 30 days after you were denied
    credit, employment, or insurance, you might have to pay for the
    report.  It would be a good idea to mention in your letter the date
    that you requested the report by phone.

Q804. Where do I mail my request for a credit report?

    - Equifax Information Service Center, P O Box 740241, Atlanta GA
      30374-0241.  FAX: [phone].  If you were denied credit,
      employment, or insurance within the last 30 days, you might get
      faster service by calling the voice mail menu; see "Can I phone in
      my request," above.

    - Trans Union Customer Relations Center, 25249 Country Club Blvd,
      P.O.Box 7000, North Olmsted OH 44070.

    - TRW, P O Box 2350, Chatsworth CA 91313-2350.  If you were denied
      credit, employment, or insurance within the last 60 days, you
      might get faster service by calling the voice mail menu; see "Can
      I phone in my request," above.

Q805. What information should I provide when requesting a report?

    If you have a letter denying you credit, employment, or insurance
    within the last 30 days, a copy of the letter should be enough for a
    report from the credit bureau that it names.  If you're just
    requesting a routine copy, you can probably get it with just your
    name, address, and Social Security number.  Either way, your report
    may be more complete if you also include your date of birth and
    previous address.  (An email correspondent reported in late April
    1992 that he sent postcards with just his name, address, and Social
    Security number and got reports from Equifax and Trans Union.)

    TRW, as part of its effort to create a "true partnership [with]
    consumers," according to a TRW memo published on Usenet by an
    employee, wants all the following information when you request a
    free routine report, and will refuse any requests that omit any all
    of it:  "Full name of the consumer ... including middle initial and
    generation such as Jr., Sr., II, III, etc.; current address
    including ZIP code; previous addresses with ZIP codes for the past
    five years (if the consumer has moved); Social Security Number; year
    of birth; spouse's first name ...; [and] photocopy of a billing
    statement, utility bill, driver's license or other document that
    links the name of the consumer ... with the address the report
    should be mailed to."

    And do remember to sign your request.

Q806. Help! What are all those codes on my credit report?

    There should be a separate key or explanation mailed with the
    report.  Sit down and spend some time to try to read it.  If it
    still looks like Sanskrit, you might ask a trusted friend to go over
    it with you.  Or someone in your personnel office at work, or the
    dean of students office at your school, or behind the railing at
    your bank, might be willing to help you.  (It's not their job to do
    this, so remember that you're asking a favor.  You may be charged a
    fee.)

Q807. What are "inquiries" on my credit report?

    Whenever you or anyone else asks for a copy of your credit report,
    the request is supposed to be noted as part of your credit history.
    If you apply for lots of credit cards in a short time, this will
    produce a flurry of "inquiry" notes on your credit report.  Lenders
    often turn this around and assume that a flurry of inquiries means
    you've recently applied for lots of credit, so they turn you down on
    that basis even though the inference is not strictly valid.

    If a lender cites "excessive inquiries" as a reason for turning you
    down, this is what has happened.  The lender has guidelines for how
    many inquiries in what period of time is too many.  Unfortunately,
    you have no legal right to challenge this policy or even to know
    what the specific criteria may be.

    Don't give your name or address to a merchant until you're actually
    ready to apply for credit there.  Some merchants illegally run
    credit checks on you as soon as they have your name and address,
    even though you have not applied for credit, to give them an idea of
    what to sell you and how.  (I'm told many car dealers do this.)

    I don't know what legal recourse, if any, you have against
    unauthorized inquiries.

    If lender A sees inquiries from B, C, and D but no new accounts, A
    may assume that B, C, and D turned you down for credit.  Figuring
    "better safe than sorry," A may then turn you down just because it
    assumes B, C, and D turned you down.  Again, this is a judgment call
    on the part of A, and you have no legal right to challenge it.  If
    you have not applied for any credit recently but have been, say,
    looking at cars at several dealerships, you might want to let the
    lender know this in case it's taking unauthorized inquiries into
    account.


section 9. Fixing your credit report
====================================
See the preceding two sections for general information about credit
bureaus, credit reports, and your credit history.

Q901. I've got a copy of my credit report, and it's wrong.  What now?

    First, take a deep breath.  The Federal Trade Commission says that
    inaccurate credit reports are the number-one source of consumer
    complaints, and that it is quite common for problems to take six
    months or more to be resolved.   All of the big-three agenices
    are working on making sure that all disputes are handled within
    30 days.

    Now look in the papers that came with the report.  There should be
    some instructions for reporting errors.  Follow them carefully.

    If you have a letter from the credit grantor saying that the
    information in the report is wrong, it may or may not do any good to
    send it in with your letter.  See the next Q.

    Make copies of what you are sending out.  Be sure to note the date
    you sent the corrections.

Q902. What exactly will the credit bureau do with my correction?

    Normally, they send a message to the credit grantor that originally
    reported the item to ask if it's correct.  (However, see the
    preceding Q for an exception.)  If the credit grantor says the
    information is wrong, the credit bureau corrects it.  If the credit
    grantor doesn't respond, the credit bureau may delete the item.  If
    the credit grantor says the item is correct, the bureau will tell
    you.

    There is currently no Federal law setting deadlines for the credit
    bureau to respond to you.  However, in the consent decree filed 10
    Dec 1991, TRW promised to "verify, delete, or modify any disputed
    information in a credit report within 30 days after it receives a
    complaint."

    There is also currently no way to be sure that a wrong item, once
    deleted, won't reappear later.  (In the consent decree of 10 Dec
    1991, TRW promised to change its software so that erroneous items
    won't come back in subsequent reports.)

Q903. My credit report shows adverse information, but I have a letter
      from the lender saying that information is false.  Can I submit
      this letter to the credit bureau?

    The answer is "yes" for TRW and "probably not" for Equifax and Trans
    Union.

    Industry practice has been that if you dispute an item, the credit
    bureau ignores any documentation you send.  Instead the bureau
    simply asks the credit grantor for a verification (see preceding Q).

    However, in the consent decree entered 10 Dec 1991, TRW promised it
    will accept "authentic proof of an error (such as a bill or a letter
    from a creditor)" when submitted by consumers.  I don't know whether
    TRW is actually doing this.

Q904. The credit bureau ignored my correction -- or it says an item is
      right but I can prove it's wrong. What can I do?

    There are several possibilities.

    First, you have the right to send the credit bureau a statement of
    up to 100 words about the disputed item.  The bureau is required by
    law to include that statement in your report with the item.  When
    you apply for a loan, the lender will see that statement and can
    take it into account.

    Second, you can complain to the Federal Trade Commission.  The FTC
    is the U.S.  government agency that oversees enforcement of the Fair
    Credit Reporting Act.  If the credit bureau is clearly behaving
    unreasonably, you can file a complaint with the FTC and they will
    write to the credit bureau requesting an explanation.  (The previous
    editor  actually did this with a wrong item on his credit report.  He
    had sent the bureau a copy of a letter from the reporting bank saying
    that the item was wrong, but the bureau did not respond until after
    they got a letter from the FTC.)

    Third, you can complain to your state government.  The consumer
    protection division or attorney general's office is a good starting
    point.  As noted various places in these FAQs, TRW settled lawsuits
    by fourteen state attorneys general with a consent decree filed on
    10 Dec 1991.  Thus state governments may be especially interested in
    hearing if TRW breaks the rules.  Also, Equifax and Trans Union are
    the next logical targets for state governments and the FTC.  A Texas
    assistant attorney general already announced this (December 1991).

    Fourth, you can sue for libel or defamation of character.  (source:
    FTC staff attorney, personal letter)  Obviously this is a last
    resort and will involve your paying attorney's fees.  However,
    according to {Your Credit Rating}, if you sue a credit agency or
    user of credit information who willfully or negligently violates the
    Fair Credit Reporting Act, you may be awarded actual damages, court
    costs, and attorney's fees, plus punitive damages if the
    noncompliance was willful.

Q905. My credit report shows transactions from other people with the
      same name or similar names.  How can I get it cleaned up?

    See the preceding Q's in this section.  You may also have to go back
    to the original lenders that reported the information and try to get
    them to correct their records.

    In the consent decree filed 10 Dec 1991, TRW promised to change its
    software by 31 July 1992 "to minimize cases where one consumer's
    files are mixed with another's."

Q906. My spouse and I had joint credit accounts, and s/he ran up a lot
      of debts.  Now we're divorced, and I want my ex's debts off my
      report.

    Sorry.  If an account is in two names, both are responsible for
    paying the bills on time.  Unless the report is actually in error,
    there's not much you can do as a matter of legal right.

    However, you may be able to persuade lenders to give you credit.
    Can you show that your record was clean before your marriage, that
    it was your spouse who ran up the debts, and that you've arranged
    with your creditors to pay them off over time?  It's probably best
    to visit credit managers in person, and dress like a solid citizen.
    If all else fails, you should still be able to get a secured credit
    card; see section 3, "Lists of good cards," in part 2 of this list.
    By establishing a good record with the secured card, you may
    gradually get other lenders to believe in you again.

Q907. I got in trouble and ran up a lot of debts I couldn't pay, and now
      my credit report looks awful.  How can I get credit?

    Well, lenders grant credit based on how likely they think you are to
    pay off your new debts.  If you have existing debts that are
    delinquent, you're not really a good risk.  The best way to become a
    good risk is to clear off your old debts.  There are several things
    you can do.

    Many cities have consumer credit counseling agencies that will help
    you develop a plan to pay off all your debts.  (Usually these are
    free, run by the government or by public-interest groups.  They are
    not the same as "loan consolidation services" that are actually
    for-profit finance companies.)  Most will suggest that you cut up
    all your credit cards and not take on any new debt.  They may help
    you negotiate with your creditors to work out a payment plan that
    you can meet, or they may coach you on how to talk to your creditors
    directly.  Most lenders would rather get something than nothing.  If
    you seem to be honestly trying to pay what you owe and if you have
    communicated with them, they may be willing to be patient rather
    than turn your account over for collection.

    If your circumstances have changed abruptly -- lost your job, major
    health problems for yourself or your family, etc.  -- it's best to
    visit your creditors before your accounts are past due.  Explain the
    situation directly, let them know that you do intend to pay the
    debts but need to work out reduced payments, then make those
    payments on time.

    {Your Credit Rating} suggests, "You may want to place a statement in
    your file, also, to explain a period of delinquency caused by some
    unexpected hardship, such as serious illness, a catastrophe, or
    unemployment, which cut off or drastically reduced your income."

    If you're really over your head, you may have to declare bankruptcy.
    Talk to a consumer credit counseling service before taking this
    drastic step, and check some self-help books out of the library.
    They will help you decide what you need to do and whether you need a
    lawyer.