Consumer Information

What is Credit
What is a Credit Report
Consumer Credit Rights

What is Credit?

Having credit allows you to make purchases and pay at a later date. Credit is provided to you based on the trust that you will repay within a specified time. It is an agreement that allows you to use goods and services today and permits you to pay on some agreed schedule in the future.

Using Credit
 

Advantages	. To enhance one's lifestyle . To make purchases more convenient . To take advantage of sales . To buy large ticket items (car or furniture)
Disadvantages	. Future earnings committed . Finance charges may be added to purchase cost . Too easily used . Misuse results in poor credit record . Credit cards may be stolen or lost

Types of Credit

Credit transactions are of four types. A credit card purchase is the most frequently used credit. When a consumer makes a purchase, they may use a credit card to pay for it. A credit card is an example of "unsecured, open-end" type of credit. In this agreement, the borrower has a line of credit available for a specific limit backed only by his or her creditworthiness. A borrower must make at least a minimum payment each month based on the outstanding balance. The wise consumer will pay the entire balance each month.

Another often used form of credit is a mortgage loan. When consumers decide to buy a house, they go to a bank or finance company to take out a mortgage. Mortgage loans are known as "secured, closed-end" credit. The loan is based on collateral and a specific number of payments are scheduled for a specified period of time. A car loan is also this type of credit.

A third form of credit would enable consumers to obtain a loan without collateral to make improvements on their home. This "unsecured, closed-end" credit is available when the creditor is willing to make the loan based on the borrower's creditworthiness. It is often referred to as a "signature loan." Payments are for a specific amount for a specified period of time.

Finally if consumers decide to get a loan using their home as collateral, this type of credit is known as an "open-end equity" or "secured, open-end" loan. These loans are made against a borrower's property and the amount of the loan is based on the equity in the home.

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What is a Credit Report?

A credit report is a picture of your credit, debt and payment history. When you apply for credit such as a credit card or a loan, this is reported to one of the major credit bureaus and a file is established in your name. Your credit file will document: credit inquiries made on your file by credit providers, employers, insurance companies and government agencies (usually within the past two years), public record information such as bankruptcies, judgments and tax liens. Your credit history includes the names of your creditors, your payment history, and consumer statements made by you.

How do you establish a credit history?
There are several ways to establish a credit history. Primarily, you have to be extended credit and develop a credit record. If you have not been given credit recently, you can obtain it in a number of ways. For example, you might get a credit card at a local store. If you belong to a credit union, you may be able to apply for a small loan. In addition, you may apply for a loan at a bank or a finance company.

When you receive credit and pay your monthly bills on time, you establish a good credit record. If you are denied credit, find out why and ask how you can correct the situation.

How do you obtain a copy of your credit report?
If you write a credit reporting agency and include the proper identification, the bureau is legally required to show you everything in your file and its origin. You may want to request your report every one or two years or before a major credit purchase. There is usually a reasonable fee for this service.

When a credit grantor denies you credit because of information in the credit file, you may contact that reporting credit bureau to obtain a copy of your file.

You can find your nearest credit bureau by looking in the yellow pages under "Credit Bureaus" or "Credit Reporting Agencies." Most credit bureaus are part of one of the three automated reporting systems: Equifax Credit Information Services; Trans Union Corporation; and Experian.

When you have been denied credit, you will want to check the accuracy of your credit file, not only in the initial bureau, but also in the other two reporting systems. You will not be charged a fee.

Who are the Credit Reporting Agencies/Credit Bureaus?
There are three main credit reporting agencies. Each has their own report and you should look at your file at all three agencies regularly to make sure they contain accurate information.

Experian (Formerly TRW) National Consumer Assistance Center 1-888-397-3742
Equifax Equifax Information Services Center P.O. Box 740241 Atlanta, GA 30374 1-800-685-1111
TransUnion Corporation National Consumer Disclosure Center P.O. Box 7000 North Olmstead, OH 44070 1-800-888-4213

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Consumer Credit Rights

Truth in Lending Act - Requires all credit grantors to provide you with the annual percentage rate (APR) of any loan prior to signing. APR reflects the true cost of the credit.

Equal Credit Opportunity Act - Prohibits discrimination against you because of age, sex, marital status, race, color, religion, national origin or receipt of public assistance.

Fair Credit Billing Act - Allows for the prompt correction of errors on a credit account and prevents damage to your credit record while you are settling disputes.

Fair Credit Reporting Act - Protects consumers from incorrect credit reporting to credit bureaus. Allows for privacy. Permits the consumer to put a written explanation limited statement in their credit report. Provides for removal of outdated information after 7 years (bankruptcy after 10 years). Credit reporting agency subscribers comprised of banks and merchants, etc., may not access and individual's credit record unless authorized. This authorization is standard procedure when you sign credit and loan applications, life insurance applications, employment applications, security clearance requests, etc. Read the fineprint on the applications for more details.

Fair Debt Collection Practices Act - Prohibits debt collection agencies from abusive collection practices. Allows consumers to dispute a debt and to stop any unreasonable collection activities such as: calling before 8AM or after 9PM, harassment (vs. strong collection tactics), false statements, threatening action that isn't permissible, and unfair practices.

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