What is Consumer Credit Protection Act?

The United States federal wage garnishment law, widely known as the Consumer Credit Protection Act guards employees from discharge by their employers because their wages have been garnished in any one week. The government in 1968 approved it.

The Wage and Hour Division of the Department of Labor includes the Employment Standards Administration, who administers the act. The informed use of credit is administered by Congress and stabilizes economic acts to be enhanced with competition informed unto various financial institutions that are engaged in extension of consumer credit that would be strengthened otherwise by informed credit use.

What is the Definition of Garnishment?

A garnishment is a means of collecting a monetary judgment against a defendant by ordering a third party (the garnishee) to pay money, otherwise owed to the defendant, directly to the plaintiff.

What is Wage garnishment?

Wage garnishment, the most common type of garnishment, is the process of deducting money from an employee's monetary compensation (including salary) as a result of a court order. In the United States, such payments are limited by federal law to 25 percent of the disposable income that the employee earns. Garnishments can be taken for any type of debt but common examples of debt that result in garnishments include:

• child support
• taxes
• Unpaid Court Fines
• any other type of money judgment

When served on an employer, garnishments are taken as part of the payroll process. When processing payroll, sometimes there is not enough money in the employee's net pay to satisfy all of the garnishments. In such a case, the correct order to take a garnishment must be satisfied. For example, in a case with federal tax, local tax, and credit card garnishments, the first garnishment taken would be the federal tax garnishments, then the local tax garnishments, and finally, garnishments for the credit card.

At present four U.S. states - North Carolina, Pennsylvania, South Carolina and Texas - do not allow wage garnishment at all except for debts related to taxes, child support, federally guaranteed student loans, and court-ordered fines or restitution for a crime the debtor committed. Several other states observe maximum thresholds that are lower than the 25 percent maximum provided by federal law. States may also prohibit garnishment altogether in certain circumstances. For example, in Florida the wages of a person who provides more than half the support for a child or other dependent are exempt from garnishment altogether (though this exemption is subject to waiver).

What are I.R.S. Rules?

There are only a few requirements that must be met before the IRS starts a wage garnishment:

• The IRS must have assessed the tax and sent a Notice and Demand for Payment;
• The taxpayer must have neglected or refused to pay the tax; and,
• The IRS must have sent a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice) at least 30 days before the levy.

The IRS can serve the Final Notice in person, leave it at the taxpayer's home or usual place of business, or send it to the last known address by certified or registered mail. It is important to note that the IRS is only required to send the Final Notice to the last address known to it. The taxpayer does not need to actually receive the notice for it to be effective. Many taxpayers never actually receive the final notice. Those taxpayers may not realize they are in danger of receiving a levy until their wages are actually garnished.

Fair Debt Collection Practices Act

What is Fair Debt collection Practices Act?

The Fair Debt Collection Practices Act (or FDCPA), et seq., is a United States statute added in 1978 as Title VIII of the Consumer Credit Protection Act. Its purposes are to eliminate abusive practices in the collection of consumer debts, to promote fair debt collection and to provide consumers with an avenue for disputing and obtaining validation of debt information in order to ensure the information's accuracy.

The Act creates guidelines under which debt collectors may conduct business, defines rights of consumers involved with debt collectors, and prescribes penalties and remedies for violations of the Act. It is sometimes used in conjunction with the Fair Credit Reporting Act.

People and entities covered by the FDCPA

In the United States, debt collectors may use different names such as "collection agency," "factoring company" or some other name that may or may not be understood by a consumer to be a third-party collector (and that might be used to claim immunity from the Act). However, the FDCPA broadly defines debt collectors as "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another."

While the FDCPA generally only applies to third party debt collectors--not internal collectors for an "original creditor" -- some states, such as California, have similar state consumer protection laws, which mirror the FDCPA, and regulate original creditors. In addition, courts have generally found debt buyers to be covered by the FDCPA even though they are collecting their own debts.

The FDCPA's definitions of "consumers" and "debt" specifically restrict the coverage of the act to personal and non-commercial transactions. Thus, debts owed by businesses are not regulated.

What is the Prohibited conduct?

The Act prohibits certain types of "abusive and deceptive" conduct when attempting to collect debts, including the following:

• contacting consumers by telephone outside of the hours of 8:00 a.m. to 9:00 p.m. local time
• contacting consumers in any way (other than litigation) after receiving WRITTEN notice that said consumer wishes no further contact or refuses to pay the alleged debt (unless it is to say that collection efforts are being terminated or that the collector intends to file a lawsuit)
• contacting consumers at their place of employment (after having been told verbally or in writing that this is not acceptable)
• continuation of collection efforts after receiving WRITTEN request from consumer for validation of debt, unless/until validation is provided
• misrepresenting the debt or using deception to collect the debt
• publishing the consumers name or address on a "bad debt" list
• adding extraneous "fees" or "charges" to the original balance (unless allowed by law)
• threatening consumers with arrest or legal action that is not actually contemplated or even possible
• using abusive or profane language in the course of communication related to the debt
• revealing or discussing the nature of debts with third parties (other than the consumer's spouse or attorney)
• reporting false information on a consumer's credit report or threatening to do so in the process of collection
• filing lawsuits in places other than where the consumer lives or signed the contract
  
  

What is the Required conduct?

Further, the FDCPA requires debt collectors to:

• identify themselves and notify the consumer, in every communication, that the communication is from a debt collector
• give the name and address of the original creditor (company to which the debt was originally payable) upon the consumer's written request.
• provide verification of the debt to the consumer upon written request (though what constitutes verification is not spelled out by the Act)
• notify the consumer of their right to dispute the debt, in part or in full, with the debt collector. Such a dispute must also be reported by the creditor to any credit bureau that reports it.

(If a written dispute or request for verification is sent within 30 days after receiving the first written notice concerning the consumer's rights, then the debt collector must either provide the requested validation information or cease their collection efforts altogether. The so called 30-day "g" validation notice is required to be sent by debt collectors within five days of the initial communication. The consumer's receipt of this notice starts the clock running on the 30-day right to demand validation of the debt from the debt collector. Consumers may still dispute a debt later, but they lose the right to compel the debt collector to produce verification of the debt if they dispute it after the 30-day period has elapsed. A consumer may also verbally dispute a debt--though the consumer does not preserve all of his/her rights by doing so. )

Enforcement of the FDCPA

The Federal Trade Commission has the authority to administratively enforce the FDCPA using its powers under the Federal Trade Commission Act.

Aggrieved consumers may also file a private lawsuit in a State or Federal court to collect damages (actual, statutory, attorney's fee and court-costs) from third-party debt collectors. The FDCPA is a strict liability law, which means that a consumer need not prove actual damages in order to claim statutory damages of up to $1,000 if a debt collector is proven to have violated the FDCPA. The collector may, however, escape penalty if it shows that the violation (or violations) was the result of a "bona fide error."

Alternately, if the consumer loses the lawsuit and the court determines that the consumer filed the case in bad faith and for the purposes of harassment, the court may then award attorney's fees to the debt collector. Historically, courts have only very rarely ordered consumers to pay debt collectors' attorney fees in a FDCPA case.

Criticisms of the FDCPA

By consumer groups: Some consumer groups argue that the FDCPA does not go far enough, and does not provide sufficient deterrence against unscrupulous collection agencies. Consumer groups have complained that the maximum statutory damages contained in the original 1978 version of the law has not kept up with inflation. According to the inflation calculator at the Bureau of Labor Statistics' website, that same penalty would be the equivalent of $3,105.83 by 2006 standards. The Washington, D.C.-based National Association of Consumer Advocates is the largest consumer advocacy organization in the United States. Its member attorneys bring thousands of such FDCPA suits each year in virtually all 50 states.

Many debt collectors and the consumer rights attorneys who sue them for violations of the FDCPA rely heavily on the definitive legal treatise on the FDCPA produced by the National Consumer Law Center

By the credit industry

Conversely, many in the credit industry have taken the stance that the FDCPA has often been used to file frivolous lawsuits and seek damages for minor technical violations and has, at times, seriously impeded their ability to collect valid debts. Given the strict liability nature of the FDCPA, the collections industry and the insurance companies who provide liability coverage for them have repeatedly lobbied Congress to relax provisions of the law to reduce their civil exposure for these "hyper-technical" violations.

The debt collection industry is supported by an industry trade group based in Minneapolis, Minnesota; called ACA International. The ACA produces a variety of legal compliance materials for debt collectors and serves as an industry lobbyist. The ACA seeks legal and interpretive changes that will assist its members in the collection of debts for their clients. The ACA is also involved in a variety of public relations activities related to the collection industry.

The FTC Report

For its part, the Federal Trade Commission produces an annual report to Congress of its findings with respect to its FDCPA enforcement activities. This report details consumer complaints to the FTC about alleged debt collector violations of the FDCPA. There were more than 66,000 consumer complaints made to the FTC about unlawful collection activities in 2005. This was an overall increase of more than 14% over 2004

Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) is an American federal law (codified at et seq.) that regulates the collection, dissemination, and use of consumer credit information. Along with the Fair Debt Collection Practices Act (FDCPA), it forms the base of consumer credit rights in the United States.

Consumer reporting agencies

Consumer reporting agencies (CRAs) are entities that collect and disseminate information about consumers to be used for credit evaluation and certain other purposes. They hold the databases, which are the origins of a consumer's, credit report. CRAs have a number of responsibilities under FCRA, including the following:

• Provide a consumer with information about him or her in the agency's files and to take steps to verify the accuracy of information disputed by a consumer. Under the Fair and Accurate Credit Transactions Act (FACTA), an amendment to the FCRA passed in 2003, consumers are now able to receive one free credit report a year. The free report can be requested by telephone, mail or through the government-authorized website, www.annualcreditreport.com.
  
• If negative information is removed as a result of a consumer's dispute, it may not be reinserted without notifying the consumer within 5 days, in writing.
  
• CRAs may not retain negative information for an excessive period. The FCRA spells out how long negative information, such as late payments, bankruptcies, tax liens or judgments may stay on a consumer's credit report - typically 7 years from the date of the delinquency. The exceptions: bankruptcies (10 years) and tax liens (7 years from the time they are paid).

The three big CRAs Experian, Trans Union and Equifax, do not interact with information furnishers directly as a result of consumer disputes. They use a system called E-Oscar

Information furnishers

An information furnisher, as defined by the FCRA, is a company that provides information to consumer reporting agencies. Typically, these are creditors, with which a consumer has some sort of credit agreement (credit card companies, auto finance companies and mortgage banking institutions, to name a few). However, other examples of information furnishers are collection agencies (third-party collectors), state or municipal courts reporting a judgment of some kind, past and present employers and bonders.

Under the FCRA, these information furnishers may only report to a consumer's credit report under the following guidelines:

• They must provide complete and accurate information to the credit rating agencies.
• The duty to investigate disputed information from consumers falls on them.
• They must inform consumers about negative information which has been or is about to be placed on a consumer's credit report within 30 days.

(This notice doesn't have to be sent as a separate notice, but may be placed on a consumer's monthly statement. If sent as part as the monthly statement, it needs to be conspicuous, but need not be in bold type. Required wording (developed by the US Federal Treasury Department):

Notice before negative information is reported: We may report information about your account to credit bureaus. Late payments, missed payments, or other defaults on your account may be reflected in your credit report.

Notice after negative information is reported: We have told a credit bureau about a late payment, missed payment or other default on your account. This information may be reflected in your credit report.)

Users of the information for credit, insurance, or employment purposes

Users of the information for credit, insurance, or employment purposes have the following responsibilities under the FCRA:

• They must notify the consumer when an adverse action is taken on the basis of such reports.
  
• Users must identify the company that provided the report, so that the accuracy and completeness of the report may be verified or contested by the consumer.

Likelihood of errors on a credit report

Some fractions of consumer credit reports contain errors. A study released by the U.S. Public Interest Research Group in June 2004 found that 79% of the consumer credit reports surveyed contained some kind of error or mistake. As a result, many consumers frequently invoke their rights under the FCRA to review and correct their credit reports.

The Fair and Accurate Credit Transactions Act ("FACTA") of 2003 has allowed easier access to consumers wishing to view their reports and dispute items.

Civil liability for willful violations of the FCRA

Under section § 602 of the Act, a consumer may seek a maximum of $1000 in statutory damages, plus actual damages, punitive damages and reasonable attorney's fees and costs for willful noncompliance with the Act. Any consumer may file suit in state or federal court to enforce the Act.

Which companies are regulated by the FCRA?

While putative database companies like Lexis, Westlaw, ChoicePoint, and eFunds (owner of ChexSystems) do not create credit reports, they may gather the same types of information and as a result may subject some of their actions to FCRA.

An entity that meets the definitional requirement for a "consumer reporting agency" (CRA) in Section 603(f) of the FCRA is covered by the law even if the only information it collects, maintains, and disseminates is obtained from "public record" sources.

Section 603(f) defines a "consumer reporting agency" as any person "which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information ... for the purpose of furnishing consumer reports to third parties ...". In turn, Section 603(d) defines a "consumer report" as the communication of "any information" by a CRA that bears on a consumer's "credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living" that is "used or expected to be used or collected in whole or in part" for the purpose of serving as a factor in establishing eligibility for credit or insurance to be used primarily for personal, family, or household purposes, employment purposes, or any other purpose authorized under Section 604.
If the commercial service you describe regularly provides information for the purposes set forth in the definition of consumer report in Section 603(d), the agency is a consumer reporting agency and the information it collects from public record sources and maintains in its computerized files is subject to the FCRA. Excerpt of a 1999 FTC advisory opinion

Fair and Accurate Credit Transactions Act

Under the Fair and Accurate Credit Transactions Act of 2003 (FACT Act or FACTA, ) which was passed by Congress on December 4 2003 as an amendment to the Fair Credit Reporting Act, consumers can request and obtain a free credit report once every twelve months from each of the three nationwide consumer credit reporting companies (Equifax, Experian and TransUnion). In cooperation with the Federal Trade Commission, the three major credit reporting agencies set up the website annualcreditreport.com to provide free access to annual credit reports.

This act also contains provisions to help reduce identity theft, such as the ability for individuals to place alerts on their credit histories if identity theft is suspected, or if deploying overseas in the military, thereby making fraudulent applications for credit more difficult.

Another key item was the requirement that mortgage lenders provide consumers with a Credit Disclosure Notice that included their credit scores, range of scores, credit bureaus, scoring models, and factors affecting their scores. This form is typically available from credit reporting agencies, and many will send this directly to the consumer on the lenders behalf.

Fact Sheet:

President Bush Signs the Fair and Accurate Credit Transactions Act of 2003

On December 4, 2003, President Bush signed into law the Fair and Accurate Credit Transactions Act of 2003, ensuring that all citizens are treated fairly when they apply for a mortgage or other form of credit.

The legislation will provide consumers, companies, consumer reporting agencies, and regulators with important new tools that expand access to credit and other financial services for all Americans enhance the accuracy of consumers' financial information, and help fight identity theft. These reforms make permanent the uniform national standards of our credit markets, and institute new, strong consumer protections.

Background of Fair and Accurate Transaction Act

The Fair and Accurate Credit Transactions Act of 2003 will accomplish the following key Administration priorities to help ensure that all Americans, of every income level and background, are able to build good credit and confront the problem of identify theft:

• Ensuring that lenders make decisions on loans based on full and fair credit histories, and not on discriminatory stereotypes. In 1996, uniform national standards were established to set clear rules on what credit agencies were entitled to include in individual credit reports, and now more than a million Americans have credit as a result. This legislation makes those national standards permanent.
  
• Improving the quality of credit information, and protecting consumers against identity theft.
  
  • Giving every consumer the right to their credit report free of charge every year. Consumers will be able to review a free report every year for unauthorized activity, including activity that might be the result of identity theft.
    
  • Helping prevent identity theft before it occurs by requiring merchants to leave all but the last five digits of a credit card number off store receipts. This law will make sure that slips of paper that most people throw away do not contain their credit card number, a key to their financial identities.
    
  • Creating a national system of fraud detection to make identity thieves more likely to be caught. Previously, victims would have to make phone calls to all of their credit card companies and three major credit rating agencies to alert them to the crime. Now consumers will only need to make one call to receive advice, set off a nationwide fraud alert, and protect their credit standing.
    
  • Establishing a nationwide system of fraud alerts for consumers to place on their credit files. Credit reporting agencies that receive such alerts from customers will now be obliged to follow procedures to ensure that any future requests are by the true consumer, not an identity thief posing as the consumer. The law also will enable active duty military personnel to place special alerts on their files when they are deployed overseas.
    
  • Requiring regulators to devise a list of red flag indicators of identity theft, drawn from the patterns and practices of identity thieves. Regulators will be required to evaluate the use of these red flag indicators in their compliance examinations of financial institutions, and impose fines where disregard of red flags has resulted in losses to customers.
    
  • Requiring lenders and credit agencies to take action before a victim even knows a crime has occurred. With oversight by bank regulators, the credit agencies will draw up a set of guidelines to identify patterns common to identity theft, and develop methods to stop identity theft before it can cause major damage.

This legislation gives consumers unprecedented tools to fight identity theft and continued access to the most dynamic credit markets in the world. With a free credit report and powerful new tools to fight fraud, consumers have the ability to better protect themselves and their families.

What is Identity Theft?

Identity theft as a term first appears in U.S.A and in U.K literature in the 1990s, leading to the drafting of the Identity Theft and Assumption Deterrence Act.

In 1998, The Federal Trade Commission appeared before the Subcommittee on Technology, Terrorism and Government Information of the Committee of the Judiciary, United States Senate. The FTC highlighted the concerns of consumers for financial crimes exploiting their credit worthiness to commit loan fraud, mortgage fraud, lines-of-credit fraud, credit card fraud, commodities and services frauds.

With the rising awareness of consumers to an international problem, in particular through a proliferation of websites and coverage in the media, the term "identity theft" has since morphed to encompass a much broader range of identification-based crimes. The more traditional

crimes range anywhere from deadbeat parents avoiding their financial obligations, to criminals providing the police with stolen or forged documents, thereby avoiding detection, as well as money laundering, trafficking in human beings, stock market manipulation, and even to terrorism.

Less commonly understood outside criminal intelligence and law enforcement circles is the impact of identification-based concealment crimes. As with credit-dependent consumer financial crimes, criminals acquire legally attributed personal identifiers and then clone someone to them for concealment from authorities. Unlike credit-dependent financial crimes, they are non-self-revealing, continuing for an indeterminate amount of time without being detected.

What are the four kinds of Identity Theft?

According to the non-profit Identity Theft Resource Center, identity theft is sub-divided into four categories:

1. Financial Identity Theft (using another's name and SSN to obtain goods and services),
   
2. Criminal Identity Theft (posing as another when apprehended for a crime),
   
3. Identity Cloning (using another's information to assume his or her identity in daily life),
   
4. Business/Commercial Identity Theft (using another's business name to obtain credit).

The Identity Theft and Assumption Deterrence Act (2003) [ITADA] amended the U.S. Code, s. 1028 - Fraud related to activity in connection with identification documents, authentication features, and information. The Code now makes possession of any "means of identification" to "knowingly transfer, possess, or use without lawful authority" a federal crime, alongside unlawful possession of identification documents.

Some people prefer the term "identity fraud" to describe when their means of identification has been exploited for an unlawful purpose. Others believe the thief does deprive the owner of his identity by replacing his reputation with the thief's. Both uses of the term focus on the act of acquiring the legally attributed personal identifiers and other personal information necessary to perpetrate the impersonation.

Example of Identity Fraud?

A classic example of consumer-dependent financial crime occurs when David obtains a loan from a financial institution impersonating Harry. David uses Harry's personal identifiers that he has somehow acquired. These personal identifiers conform with the data retained on Harry by national credit-rating services. The identifiers include surname, given names, date of birth, Social Security number (U.S.), Social Insurance Number (Cda), current and former addresses etc. These data are all part of credit header information retained by credit-rating services. For David, these crimes are non self-revealing, although authorities can track David down unless he conceals his mailing address somehow. With consumers being credit-dependent, the burden shifts to them to re-establish their credit-worthiness with the lending institutions and credit-rating services.

How do thieves steal an identity?

Identity theft starts with the misuse of your personally identifying information such as your name and Social Security number, credit card numbers, or other financial account information. For identity thieves, this information is as good as gold.

Skilled identity thieves may use a variety of methods to get hold of your information, including:

• Dumpster Diving: They rummage through trash looking for bills or other paper with your personal information on it.
  
• Skimming: They steal credit/debit card numbers by using a special storage device when processing your card.
  
• Phishing: They pretend to be financial institutions or companies and send spam or pop-up messages to get you to reveal your personal information.
  
• Changing Your Address: They can divert your billing statements to another location by completing a change of address form.
  
• Old-Fashioned Stealing: They steal wallets and purses; mail, including bank and credit card statements; pre-approved credit offers; and new checks or tax information. They steal personnel records, or bribe employees who have access.
  
• Pretexting: They use false pretenses to obtain your personal information from financial institutions, telephone companies, and other sources

What do thieves do with a stolen identity?

Once they have your personal information, identity thieves use it in a variety of ways.

• Credit card fraud:
  
  • They may open new credit card accounts in your name. When they use the cards and don't pay the bills, the delinquent accounts appear on your credit report.
  • They may change the billing address on your credit card so that you no longer receive bills, and then run up charges on your account. Because your bills are now sent to a different address, it may be some time before you realize there's a problem.
    
• Phone or utilities fraud:
  
  • They may open a new phone or wireless account in your name, or run up charges on your existing account.
  • They may use your name to get utility services like electricity, heating, or cable TV.
    
• Bank/finance fraud:
  
  • They may create counterfeit checks using your name or account number.
  • They may open a bank account in your name and write bad checks.
  • They may clone your ATM or debit card and make electronic withdrawals your name, draining your accounts.
  • They may take out a loan in your name.
    
• Government documents fraud:
  
  • They may get a driver's license or official ID card issued in your name but with their picture.
  • They may use your name and Social Security number to get government benefits.
  • They may file a fraudulent tax return using your information.
    
• Other fraud:
  
  • They may get a job using your Social Security number.
  • They may rent a house or get medical services using your name.
  • They may give your personal information to police during an arrest. If they don't show up for their court date, a warrant for arrest is issued in your name.

How can you find out if your identity was stolen?

The best way to find out is to monitor your accounts and bank statements each month, and check your credit report on a regular basis. If you check your credit report regularly, you may be able to limit the damage caused by identity theft.

Unfortunately, many consumers learn that their identity has been stolen after some damage has been done.

• You may find out when bill collection agencies contact you for overdue debts you never incurred.
• You may find out when you apply for a mortgage or car loan and learn that problems with your credit history are holding up the loan.
• You may find out when you get something in the mail about an apartment you never rented, a house you never bought, or a job you never held.

What should you do if your identity is stolen?

Filing a police report, checking your credit reports, notifying creditors, and disputing any unauthorized transactions are some of the steps you must take immediately to restore your good name. Victims of the identity theft should visit the official site of FTC and make a report for your identity stolen. www.ftc.gov

How long can the effects of identity theft last?

It is difficult to predict how long the effects of identity theft may linger. That's because it depends on many factors including the type of theft, whether the thief sold or passed your information on to other thieves, whether the thief is caught, and problems related to correcting your credit report.

Victims of identity theft should monitor financial records for several months after they discover the crime. Victims should review their credit reports once every three months in the first year of the theft, and once a year thereafter. Stay alert for other signs of identity theft.

Don't delay in correcting your records and contacting all companies that opened fraudulent accounts. Make the initial contact by phone, even though you will normally need to follow up in writing. The longer the inaccurate

Should you file a police report if your identity is stolen?

A police report that provides specific details of the identity theft is considered an Identity Theft Report, which entitles you to certain legal rights when it is provided to the three major credit reporting agencies or to companies where the thief misused your information. An Identity Theft Report can be used to permanently block fraudulent information that results from identity theft, such as accounts or addresses, from appearing on your credit report.

• It will also make sure these debts do not reappear on your credit reports.
• Identity Theft Reports can prevent a company from continuing to collect debts that result from identity theft, or selling them to others for collection.
• An Identity Theft Report is also needed to place an extended fraud alert on your credit report.

You may not need an Identity Theft Report if the thief made charges on an existing account and you have been able to work with the company to resolve the dispute. Where an identity thief has opened new accounts in your name, or where fraudulent charges have been reported to the consumer reporting agencies, you should obtain an Identity Theft Report so that you can take advantage of the protections you are entitled to.

In order for a police report to entitle you to the legal rights mentioned above, it must contain specific details about the identity theft. You should file an ID Theft Complaint with the FTC and bring your printed ID Theft Complaint with you to the police station when you file your police report. The printed ID Theft Complaint can be used to support your local police report to ensure that it includes the detail required.

A police report is also needed to get copies of the thief's application, as well as transaction information from companies that dealt with the thief. To get this information, you must submit a request in writing, accompanied by the police report, to the address specified by the company for this purpose.

What can you do to help fight identity theft?

A great deal!

Awareness is an effective weapon against many forms identity theft. Be aware of how information is stolen and what you can do to protect yours, monitor your personal information to uncover any problems quickly, and know what to do when you suspect your identity has been stolen.

Armed with the knowledge of how to protect yourself and take action, you can make identity thieves' jobs much more difficult. You can also help fight identity theft by educating your friends, family, and members of your community. The FTC has prepared a collection of easy-to-use materials to enable anyone regardless of existing knowledge about identity theft to inform others about this serious crime. To Filing a complaint with the FTC is one of several important steps that victims of identity theft should take. The links below will walk you how to file a complaint with the FTC, and how you can get the protections that you, as a victim of ID theft, may be entitled to

• Defend: Recover from Identity Theft
• What should I know before filling out the FTC's ID Theft Complaint Form?
• Instructions for completing the ID Theft Complaint Form
• What should I know once I've filled out and printed the FTC's ID Theft Complaint Form?
  

What is a Fair Credit Billing Act?

Errors/Corrections/Fixing

The Fair Credit Billing Act (FCBA) is a United States federal law enacted as an amendment to the Truth in Lending Act. Its purpose is to protect consumers from unfair billing practices and to provide a mechanism for addressing billing errors in "open end" credit accounts, such as credit card or charge card accounts.

What are the Examples of billing errors?

The following are examples of billing errors under the FCBA:

• Charges not actually made by the consumer
• Charges in the wrong amount
• Charges for goods not received by the consume
• Charges for goods not delivered as agreed
• Charges for goods that were damaged on delivery
• Failures to properly reflect payments or credits to an account
• Calculation errors
• Charges that the consumer wants clarified or requests proof of
• Statements mailed to the wrong address

Correction of billing errors

The Fair Credit Billing Act (FCBA) allows consumers to dispute billing errors by sending a written notice of the dispute to the creditor. To trigger duties under the Act, you must send a written dispute via mail (US Postal Service) to the "billing inquiries" address on your credit card statement. The creditor must receive this dispute within sixty days of the statement date on the account statement that first contained the billing error. This usually leads to a chargeback to the vendor.

After receiving notice of a dispute, the credit issuer must acknowledge the dispute, investigate the claim and, within ninety days, make appropriate corrections either to the account or send a letter to the consumer explaining why the creditor believes there was no error. If the creditor responds that they believe there was no error, the consumer can request copies of documentation supporting the validity of the disputed items.

Fixing Credit Report Errors

You have the right, under the Fair Credit Billing Act (FCBA), to dispute the totality and truthfulness of information in your credit file. When a credit-reporting agency receives a dispute, it must reinvestigate and record the current status of the disputed items within a "reasonable period of time," unless it believes the dispute is "frivolous or irrelevant." If the credit-reporting agency cannot verify a disputed item, it must delete it. If your report contains erroneous information, the credit-reporting agency must correct it. If an item is incomplete, the credit-reporting agency 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 credit-reporting agency must show that your payments are now current.
• If your file shows an account that belongs to another person, the credit-reporting agency would have to delete it. In addition, at your request, the credit-reporting agency must send a notice of correction to any report recipient who has checked your file in the past six months.
• Items in your credit profile, which you feel, deserve further explanation (such as an account that was paid late due to the loss of job, military call-up, or unexpected medical bills); you can send a brief statement to the appropriate credit-reporting agency. The information will be placed in your credit profile and will be disclosed each time it is accessed.

Other regulations of the Fair Credit Billing Act (FCBA)

In addition to creating a mechanism for dealing with billing errors, the FCBA contains additional regulations, including the following:

• Billing statements must be sent at least fourteen days before the payment is due for credit accounts that have a grace period prior to adding finance charges.
• If banks report payments as delinquent to credit bureaus they must also report a charge is disputed.
• Credit card companies may not prohibit merchants from offering discounts to people who pay with cash or check.
• Banks may generally not use money in checking or savings accounts to pay a delinquent credit account with the same bank.
• The FCBA also gives a consumer the right to sue or assert defenses against the credit company (instead of the actual merchant) in a dispute about the quality of goods or services received, to the dollar extent of the amount of the charge(s) involved.

(The dollar amount of the charge must exceed $50, and the purchase must have been made in the consumer's home state or within 100 miles of their address (unless the creditor is affiliated with the merchant, in which case these restrictions do not apply). The consumer must also make a good faith attempt to resolve the dispute prior to invoking this right.)

Enforcement of the Fair Credit Billing Act (FCBA)

The Federal Trade Commission is the "overall enforcing agency" for purposes of administrative enforcement, though compliance by banks is enforced under section 8 of the Federal Deposit Insurance Act.

A consumer may also file a private lawsuit in any state or federal court with jurisdiction over the parties to recover actual damages, statutory damages of double the erroneous finance charge(s), and his or her costs and attorney fees (if the claim is successful). If the alleged unlawful conduct is widespread, the consumer can also seek to file a class action suit and seek damages up to $500,000 or 1 per centum of the net worth of the creditor.

What is an adverse credit history?

Adverse credit history, also called sub-prime credit history, non-status credit history, impaired credit history, poor credit history, and bad credit history, is a negative credit rating.

A negative credit rating is often considered undesirable to lenders and other extenders of credit for the purposes of loaning money or capital.

What are the Reasons for credit Score?

A consumer or business' credit history is regularly tracked by credit rating agencies. The data reported by these agencies is primarily provided to them by creditors and includes detailed records of the relationship a person or business

has with the lender. Detailed account information, including payment history, credit limits, high and low balances, and any aggressive actions taken to recover overdue debts, are all reported regularly (usually monthly). This information can be quite detailed and arduous to navigate by a potential lender dealing with a new applicant. TO ADDRESS THIS ISSUE, CREDIT SCORING "WAS INVENTED".

All credit bureaus also offer a supplemental service called credit scoring. Credit scoring is the process of using a proprietary mathematical algorithm to create a numerical value that alleges to be a total picture of an applicant's creditworthiness. Scores, frequently based on numbers (ranging from 300-850 for consumers in the United States), are alleged to statistically analyze a credit history, in comparison to other debtors, and gauge the magnitude of financial risk. Since lending money to a person or company is a risk, credit scoring offers a standardized way for lenders to assess that risk rapidly and "without prejudice."

Credit scores allege to assess the likelihood that a borrower will repay a loan or other credit obligation. The higher the score, the better the credit history and the higher the probability that the loan will be repaid on time; this theory purports. When creditors report an excessive number of late payments, or trouble with collecting payments, a "hit" on the score is suffered. Similarly, when adverse judgments and collection agency activity are reported, even bigger "hits" on this score are suffered. Repeated hits can lower the score and trigger what is called a negative credit rating or adverse credit history.

In addition, when a lender requests a credit score, it can cause a small drop in the credit score, consequently, too many inquiries also raise red flags and it results in drop in the FICO score.

Why Reporting of the credit score

The information in a credit report is sold by credit agencies to organizations that are considering whether to offer credit to individuals or companies. It is also available to other entities with a "permissible purpose." The consequence of a negative credit rating is typically a reduction in the likelihood that a lender will approve an application for credit under favorable terms, if at all. Interest rates on loans are significantly affected by credit history-the higher the credit rating, the lower the interest while the lower the credit rating, the higher the interest. The increased interest is used to offset the higher rate of default within the low credit rating group of individuals.

In the United States, in certain cases, insurance, housing, and employment can also be denied based on a negative credit rating.
Note that the credit reporting agencies that do not decide whether a credit history is "adverse". It is the individual lender or creditor, which makes that decision, each lender, has its own policy on what scores fall within their guidelines. The specific scores that fall within a lender's guidelines are most often NOT disclosed to the applicant due to its nature as a trade secret. In the United States, a creditor is required to give a reason for denying credit to an applicant immediately and must provide the name and address of the credit-reporting agency that provided data that was used to make the decision.

What are Credit Inquiries?

The Fair Credit Billing Act (FCBA) outlines specifically who can see your credit profile. Businesses must have a "LEGITIMATE BUSINESS NEED," and a "PERMISSIBLE PURPOSE," as stated in the federal law to obtain your credit file. Otherwise, only you, and only those who you give written permission, can access your credit files. Your neighbors, friends, co-workers, and even your family members cannot have access to your credit profile unless you authorize it.

Some examples of those who can access your credit files are:

• Credit grantors
• Collection agencies
• Insurance companies
• Employers

Any company that receives a copy of your credit profile will be listed under the Inquiry section of your report. An inquiry is a listing of the name of a credit grantor or authorized user who has accessed your credit file. Credit grantors post an inquiry before offering you a pre-approved credit card application. These are listed as promotional inquiries on your credit file because only your name and address were accessed, not your credit history information. They are NOT sent to credit grantors or businesses for reasons of credit reporting. They are listed for your informational purposes only.

The Fair Credit Billing Act (FCBA) is the federal law regulating credit-reporting companies like Equifax, Experian, and Trans Union. It has been in effect since 1971 and undergoes periodic revisions by the Federal Trade Commission. This law protects consumers' rights such as the right to review and contest information in their credit profiles. It also specifically defines who can access the information in a credit profile, and how you are notified of this activity.

How to dispute Credit Report Errors.

Your credit report contains information about you:

• where you live,
• how you pay your bills,
• whether you've been sued,
• have you ever been arrested,
• have you filed for bankruptcy,
• is there any lien against you,
• is there any court judgment against you,
• where do you work,
• your previous employment from the last 7 years
• your previous address from the last 5 years

Consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home. The federal Fair Credit Reporting Act (FCRA) promotes the accuracy and privacy of information in the files of the nation's consumer reporting companies.

Some financial advisors and consumer advocates suggest that you review your credit report periodically. Why?

• Because the information it contains affects whether you can get a loan-and how much you will have to pay to borrow money.
• To make sure the information is accurate, complete, and up-to-date before you apply for a loan for a major purchase like a house or car, buy insurance, or apply for a job.
• To help guard against identity theft. That's when someone uses your personal information - like your name, your Social Security number, or your credit card number - to commit fraud. Identity thieves may use your information to open a new credit card account in your name. Then, when they don't pay the bills, the delinquent account is reported on your credit report. Inaccurate information like that could affect your ability to get credit, insurance, or even a job.

How to Correct Errors on your credit report.

Under the FCRA, both the consumer reporting company and the information provider (that is, the person, company, or organization that provides information about you to a consumer reporting company) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under this law, contact the consumer reporting company and the information provider.

First Step to correct errors.

Tell the consumer reporting company, in writing, what information you think is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request that it be removed or corrected.

You may want to enclose a copy of your report with the items in question circled. Your letter may look something like the one given below as an example. Send your letter by certified mail, "return receipt requested," so you can document what the consumer reporting company received. Keep copies of your dispute letter and enclosures.

Consumer reporting companies must investigate the items in question-usually within 30 days-unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. After the information provider receives notice of a dispute from the consumer reporting company, it must investigate, review the relevant information, and report the results back to the consumer reporting company. If the information provider finds the disputed information is inaccurate, it must notify all three nationwide consumer-reporting companies so they can correct the information in your file.

When the investigation is complete, the consumer reporting company must give you the results in writing and a free copy of your report if the dispute results in a change. This free report does not count as your annual free report. If an item is changed or deleted, the consumer reporting company cannot put the disputed information back in your file unless the information provider verifies that it is accurate and complete. The consumer reporting company also must send you written notice that includes the name, address, and phone number of the information provider.

If you ask, the consumer reporting company must send notices of any corrections to anyone who received your report in the past six months. You can have a corrected copy of your report sent to anyone who received a copy during the past two years for employment purposes.

If an investigation doesn't resolve your dispute with the consumer reporting company, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the consumer reporting company to provide your statement to anyone who received a copy of your report in the recent past. You can expect to pay a fee for this service.

Second Step to correct errors.

Tell the creditor or other information provider, in writing, that you dispute an item. Be sure to include copies (NOT originals) of documents that support your position. Many providers specify an address for disputes. If the provider reports the item to a consumer reporting company, it must include a notice of your dispute. Moreover, if you are correct - that is, if the information is found to be inaccurate - the information provider may not report it again.

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 consumer reporting companies: some travel, entertainment, gasoline card companies, local retailers, and credit unions are among the creditors that don't.

If you've been told that 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 consumer reporting companies to add this information to future reports. Although they are not required to do so, many consumer-reporting companies will add verifiable accounts for a fee. However, understand that if these creditors do not report to the consumer reporting company on a regular basis, the added items will not be updated in your file.

When negative information in your report is accurate, only the passage of time can assure its removal. A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for 10 years. Information about an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. There is no time limit on reporting: information about criminal convictions; information reported in response to your application for a job that pays more than $75,000 a year; and information reported because you've applied for more than $150,000 worth of credit or life insurance. There is a standard method for calculating the seven-year reporting period. Generally, the period runs from the date that the event took place.

Sample Dispute letter

Date
Your Name
Your Address, City, State, Zip Code
Complaint Department

Name of the Credit Bureau
Address
City, State, Zip Code
Phone Number (if any)

Dear Sir or Madam:

I am writing to dispute the following information in my file. I have circled the items I dispute on the attached copy of the report I received.

This item (identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.) is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be removed (or request another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please reinvestigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.

Sincerely,
Your name

Enclosures: (List what you are enclosing.)

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

What is a Credit rating agency?

A credit rating agency (CRA) is a company that assigns credit ratings for issuers of certain types of debt obligations. In most cases, these issuers are companies, cities, non-profit organizations, or national governments issuing debt-like securities that can be traded on a secondary market. A credit rating measures credit worthiness, the ability to pay back a loan, and affects the interest rate applied to loans. (A company that issues credit scores for individual credit-worthiness is generally called a credit bureau or consumer credit reporting agency.)

Interest rates are not the same for everyone, but instead are based on risk-based pricing, a form of price discrimination based on the different expected costs of different borrowers, as set out in their credit rating. There exist more than 100 rating agencies worldwide.

What are Credit Reporting Agencies?

Credit Reporting Agencies collect information about you and your credit history from public records, your creditors and other reliable sources. These agencies make your credit history available to your current and prospective creditors and employers as allowed by law. Credit agencies do not grant or deny credit.

The credit reporting agencies are:

Equifax
PO Box 105873
Atlanta, GA 30348
800-685-1111

Experian
PO Box 2002
Allen, TX 75013
Consumer Credit Questions 888-EXPERIAN
(888-397-3742)

Trans-Union
Post Office Box 2000
Chester, PA 19022
(800) 916-8800
(800) 851-2674

What is Equifax.

Equifax, Inc. is a consumer credit reporting agency in the US, considered one of the big three American credit agencies along with Experian and TransUnion. Founded in 1899, Equifax is the oldest of the three agencies and gathers and maintains information on over 400 million credit holders worldwide. Based in Atlanta, Georgia, Equifax is a global service provider with US $1.5 billion in annual revenue and 5,000 employees in 14 countries.

What is Experian.

Experian is a global credit information group, with operations in over 30 countries around the world. The company's largest operation, Experian North America, is a consumer credit reporting agency, considered one of the big three US credit agencies along with Equifax and TransUnion. As well as the US, Experian has operations in most European countries, Argentina, Brazil, Chile, South Africa, China, Japan and Australia.

What is TransUnion.

TransUnion (full name Trans Union LLC) is a consumer credit reporting agency, considered one of the "big three" agencies in the United States. Like its main competitors, Experian and Equifax, it now markets its credit reports directly to consumers, in addition to its core business of providing the reports to potential creditors.

Union Car Company as their holding company created TransUnion in 1968. Its credit business began with the purchase of Credit Bureau of Cook County (CBCC) in 1969. Trans Union was built from acquisitions of major city credit bureaus, with service agreements with local owners of bureaus, which were not for sale. Today it operates 250 offices across the U.S. and in 24 countries worldwide. It is based in Chicago, Illinois.

TransUnion was a subsidiary of The Marmon Group until January 2005. It is now an independent, privately held company.

How to get your Credit Report?

An amendment to the FCRA requires each of the nationwide consumer reporting companies-Equifax, Experian, and TransUnion-to provide you with a free copy of your credit report, at your request, once every 12 months. Access your Free Credit Reports at ftc.gov/bcp/conline/edcams/credit/.

How to Order Your Free Report

The three nationwide consumer-reporting companies have set up one website, toll-free telephone number, and mailing address through which you can order your free annual report. To order, visit www.annualcreditreport.com, call 877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. Do not contact the three nationwide consumer-reporting companies individually. They are providing free annual credit reports only through www.annualcreditreport.com, 877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

You may order your reports from each of the three nationwide consumer-reporting companies at the same time, or you can order from only one or two. The law allows you to order one free copy from each of the nationwide consumer reporting companies every 12 months.

You need to provide your name, address, Social Security number, and date of birth. If you have moved in the last two years, you may have to provide your previous address. To maintain the security of your file, each nationwide consumer reporting company may ask you for some information that only you would know, like the amount of your monthly mortgage payment. Each company may ask you for different information because the information each has in your file may come from different sources.

Other situations where you might be eligible for a free report

Under federal law, you're also entitled to a free report if a company takes adverse action against you, such as denying your application for credit, insurance, or employment, based on information in your report. You must ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company.

You're also entitled to one free report a year if you're unemployed and plan to look for a job within 60 days; if you're on welfare; or if your report is inaccurate because of fraud, including identity theft.

Otherwise, a consumer reporting company may charge you up to $19.00 for another copy of your report within a 12-month period. To buy a copy of your report, contact:

Equifax
800-685-1111
www.equifax.com

Experian
888-397-3742)
www.experian.com

TransUnion
800-916-8800
www.transunion.com

Under state law, consumers in Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey, and Vermont already have free access to their credit reports.

What is AnnualCreditreport.com?

Annualcreditreport.com is a website jointly operated by the three major U.S. credit reporting agencies. The site was created in order to comply with their obligations under the Fair and Accurate Credit Transactions Act (FACTA) to provide a mechanism for every consumer to receive a free annual credit report.

Background behind annualcreditreport.com

One of the provisions of FACTA, passed in 2003 as an amendment to the Fair Credit Reporting Act (FCRA), was a requirement that the credit reporting agencies provide, upon request, a free credit report every twelve months to every consumer. The goal was to allow consumers a way to ensure their credit information is correct and to guard against identity theft.

Accordingly, the three major credit-reporting agencies, Equifax, Experian and TransUnion created the joint venture company, Central Source LLC, to oversee their compliance with FACTA. Central Source then set up a toll-free telephone number, a mailing address and a central website, annualcreditreport.com, to process consumer requests. Access to the free report was initially rolled out in stages, based on the consumer's state of residence. However, by the end of 2005, all U.S. consumers could use these services to obtain a credit report.

What is a Credit Profile?

Your credit profile details your credit history as it has been reported to the credit reporting agencies by lenders who have extended credit to you. Your credit profile lists what types of credit you use, the length of time your accounts have been open, and whether you have paid your bills on time. It tells lenders how much credit you have used and whether you are seeking new sources of credit.

Basically, it is a picture of how you paid back the companies you have borrowed money from and how you have met other financial obligations.

There are usually five categories of information on a credit profile:

• Identifying Information
• Employment Information
• Credit Information
• Public Record Information
• Inquiries

There are many items that are NOT included on your credit profile, including:

• Your race
• Your religion
• Your health
• Your driving record
• Your criminal record
• Your political preference
• Your income

What is a Credit Grades?

Mortgage companies often grade your loan based on certain credit-related items such as payment history, amount of debt payments, bankruptcies, equity position, and your credit score.
Below is a guide to help you estimate your credit grade. This is only a guide as many companies have exceptions that may result in more strict or more lenient guidelines.

A General Guide to Credit Grades:

The figures shown here are estimates. When trying to figure your credit grade, keep in mind the following principles:

• Other Things Being Equal:
  When you have bad credit, all of the other aspects of the loan need to be in order. Equity, stability, income, documentation and assets play a larger role in the approval decision.
  
  
• Worst Case Scenario:
  When determining your grade, various combinations are allowed, but the worst case will push your grade to a lower credit guide. Late mortgage payments and bankruptcies are the most important.
  
  
• Going Once, Going Twice:
  Credit patterns are very important. A high number of recent inquiries and more than a few outstanding loans may signal a problem. A "willingness to pay" is important, thus late payments in the same time period is better than random late payments as they signal an effort to pay even after falling behind.

What is a Credit score?

Associated with a person's credit history, though not part of the credit report, is a number called the credit score, which is a mathematical model used to predict how likely a person is to repay a loan. The score is based on information in a person's credit report, and the most commonly used credit score is the FICO credit score, used by over 70% of the nation's creditors. For the FICO credit score, the scores range from 300 to 850, with higher scores considered better. The majority of credit scores fall within the 600s and 700s.

A credit score is a numerical expression based on a statistical analysis of a person's credit files, to represent the creditworthiness of that person, which is the likelihood that the person will pay his or her debts in a timely manner. A credit score is primarily based on credit report information typically sourced from credit bureaus / credit reference agencies.

Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. The use of credit or identity scoring prior to authorizing access or granting credit is an implementation of a trusted system.

Credit scoring is not limited to banks. Other organizations, such as mobile phone companies, insurance companies, employers, and government departments employ the same techniques. Credit scoring also has a lot of overlap with data mining, which uses many similar techniques.

Credit scoring is a statistical method that lenders use to quickly and objectively assess the credit risk of a loan applicant. The score is a number that rates the likelihood you will pay back a loan. Scores range from 350 (high risk) to 950 (low risk). There are a few types of credit scores; the most widely used are FICO? Scores, which were developed by Fair Isaac & Company, Inc. for each of the credit reporting agencies.

Credit scores only consider the information contained in your credit profile. They do not consider your income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or re-establishing a good track-record of making payments on time will raise your score.

Different portions of your credit file are given different weights. They are:

• 35% - Previous credit performance (specific to your payment history)
• 30% - Current level of indebtedness (current balance compared to high credit)
• 15% - Time credit has been in use (opening date)
• 15% - Types of credit available (installment loans, revolving and debit accounts)
• 5% - Pursuit of new credit (number of inquiries)

The most important factor for a good credit score is paying your bills on time. Even if the debt you owe is a small amount, it is crucial that you make payments on time. In addition, you may want to: keep balances low on credit cards and other "revolving credit;" apply for and open new credit accounts only as needed; and pay off debt rather than moving it around. Also don't close unused cards as a short-term strategy to raise your score. Owing the same amount but having fewer open accounts may lower your score.

Recent changes minimize the negative effects that rate shopping can have on a mortgage applicant. If there is a consumer originated inquiry within the past 365 days from mortgage or auto related industries, these inquiries are ignored for scoring purposes for the first 30 calendar days; then, multiple inquiries within the next 14 days are counted as one. Each inquiry will still appear on the credit report.

Every score is accompanied by a maximum of four reason codes. Reason codes identify the most significant reason that you did not score higher. The reason codes can help a lender describe the reasons for higher than expected rates or loan denial. Scores are not part of the credit profile and are not covered by the Fair Credit Reporting Act.

Your credit report must contain at least one account, which has been open for six months or greater, and at least one account that has been updated in the past six months for you to get a credit score. This ensures that there is enough information in your report to generate an accurate score. If you do not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage.

Steps to Take After Being Denied a Mortgage Loan

It is never fun to be turned down for a loan, but before you think you won't be able to get credit anywhere, there are some steps you can take.

A federal law, The Equal Credit Opportunity Act, requires lenders to tell you in writing when you have been turned down for credit. Two important pieces of information must be included in the letter you receive when you are denied credit:

• The specific reasons why you were denied credit (or information on how to obtain those reasons); and
• If a credit report was used in making that decision, the name and address of the credit reporting agency that supplied it.

You may be denied credit for various reasons, including not meeting the creditor's minimum income requirement or not being at your address or job for the required amount of time.

If your loan application was rejected because of insufficient income to afford, the house you want or you have insufficient funds for closing costs and a down payment, you could consider loan programs for low- to moderate-income borrowers with lower down payment requirements, such as an FHA loan or VA loan.

If you requested the loan amount, which is larger than 95 percent of the appraised property value, the chances are that loan will be denied. In this situation:

• You can try re-negotiate with the seller for the purchase price to lower the loan amount
• Make an additional down payment to cover the difference between the appraised value and purchase price
• If you think the appraiser undervalued the property suggest that the lender re-examine the appraisal

If your loan is turned down because of a poor credit report, you are entitled to a free copy of that report. You must request it within 60 days, so don't wait to order it. Read your report carefully to make sure it is accurate and complete.

Once you have a copy of your credit report, you should check for errors and fix any errors by disputing them with the credit report agency. If you believe that mistakes on your report led to the rejection of your application, you can ask the credit bureau to send a corrected copy to the lender. Follow up with the lender to find out if your application can be reevaluated.

Finally, you can try again. All lenders have different approval standards. Just because you didn?t get a loan from one financial institution doesn't mean you can't get one somewhere else. Try again with another company. Just don't apply for more than four or five loans in a six-month period.

Your Credit Score Helps Determine What You'll Pay

Ever wonder how a lender decides whether to grant you credit or not? For years, creditors have been using credit-scoring systems to determine if you'd be a good risk for credit cards, auto loans, and mortgages.

These days, many more types of businesses;

• including insurance companies,
• phone companies,
• mortgage companies,
• employment,
• personal loans and credit union,

are using credit scores to decide whether to approve you for a loan or service and on what terms. Auto and homeowners insurance companies are among the businesses that are using credit scores to help decide if you'd be a good risk for insurance. A higher credit score means you are likely less of a risk, and in turn, means you will be more likely to get credit or insurance - or pay less for it.

What is credit scoring?

Credit scoring is a system creditors use to help determine whether to give you credit. It also may be used to help decide the terms you are offered or the rate you will pay for the loan.

Information about you and your credit experiences, like your bill-paying history, the number and type of accounts you have, whether you pay your bills by the date they're due, collection actions, outstanding debt, and the age of your accounts, is collected from your credit report. Using a statistical program, creditors compare this information to the loan repayment history of consumers with similar profiles. For example, a credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points - a credit score - helps predict how creditworthy you are - how likely it is that you will repay a loan and make the payments when they're due.

Some insurance companies also use credit report information, along with other factors, to help predict your likelihood of filing an insurance claim and the amount of the claim. They may consider these factors when they decide whether to grant you insurance and the amount of the premium they charge. The credit scores insurance companies use sometimes are called "insurance scores" or "credit-based insurance scores."

Credit scores and credit reports

Your credit report is a key part of many credit-scoring systems. That's why it is critical to make sure your credit report is accurate. Federal law gives you the right to get a free copy of your credit reports from each of the three national consumer-reporting companies once every 12 months.

The Fair Credit Reporting Act (FCRA) also gives you the right to get your credit score from the national consumer reporting companies. They are allowed to charge a reasonable fee, generally around $8, for the score. When you buy your score, often you get information on how you can improve it.

To order your free annual report from one or all the national consumer reporting companies, and to purchase your credit score, visit www.annualcreditreport.com, call toll-free 877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P. O. Box 105281, Atlanta, GA 30348-5281. For more information, see Your Access to Free Credit Reports.

How is a credit scoring system developed?

To develop a credit scoring system or model, a creditor or insurance company selects a random sample of its customers, or a sample of similar customers, and analyzes it statistically to identify characteristics that relate to risk. Each of the characteristics then is assigned a weight based on how strong a predictor it is of who would be a good risk. Each company may use its own scoring model, different scoring models for different types of credit or insurance, or a generic model developed by a scoring company.

Under the Equal Credit Opportunity Act (ECOA), a creditor's scoring system may not use certain characteristics - for example, race, sex, marital status, national origin, or religion - as factors. The law allows creditors to use age in properly designed scoring systems. But any credit scoring system that includes age must give equal treatment to elderly applicants.

What can I do to improve my score?

Credit scoring systems are complex and vary among creditors or insurance companies and for different types of credit or insurance. If one factor changes, your score may change - but improvement generally depends on how that factor relates to others the system considers. Only the business using the scoring knows what might improve your score under the particular model they use to evaluate your application.

Nevertheless, scoring models usually consider the following types of information in your credit report to help compute your credit score:

• Have you paid your bills on time? You can count on payment history to be a significant factor. If your credit report indicates that you have paid bills late, had an account referred to collections, or declared bankruptcy, it is likely to affect your score negatively.
• Are you maxed out? Many scoring systems evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, it's likely to have a negative effect on your score.
• How long have you had credit? Generally, scoring systems consider the length of your credit track record. An insufficient credit history may affect your score negatively, but factors like timely payments and low balances can offset that.
• Have you applied for new credit lately? Many scoring systems consider whether you have applied for credit recently by looking at "inquiries" on your credit report. If you have applied for too many new accounts recently, it could have a negative effect on your score. Every inquiry isn't counted: for example, inquiries by creditors who are monitoring your account or looking at credit reports to make "prescreened" credit offers are not considered liabilities.
• How many credit accounts do you have and what kinds of accounts are they? Although it is generally considered a plus to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many scoring systems consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may have a negative effect on your credit score.

Scoring models may be based on more than the information in your credit report. When you are applying for a mortgage loan, for example, the system may consider the amount of your down payment, your total debt, and your income, among other things.
Improving your score significantly is likely to take some time, but it can be done. To improve your credit score under most systems, focus on paying your bills in a timely way, paying down any outstanding balances, and staying away from new debt.

Are credit scoring systems reliable?

Credit scoring systems enable creditors or insurance companies to evaluate millions of applicants consistently on many different characteristics. To be statistically valid, these systems must be based on a big enough sample. They generally vary among businesses that use them.

Properly designed, credit scoring systems generally enable faster, more accurate, and more impartial decisions than individual people can make. And some creditors design their systems so that some applicants - those with scores not high enough to pass easily or low enough to fail absolutely - are referred to a credit manager who decides whether the company or lender will extend credit. Referrals can result in discussion and negotiation between the credit manager and the would-be borrower.

What if I am denied credit or insurance, or don't get the terms I want?

If you are denied credit, the ECOA requires that the creditor give you a notice with the specific reasons your application was rejected or the news that you have the right to learn the reasons if you ask within 60 days. Ask the creditor to be specific: Indefinite and vague reasons for denial are illegal. Acceptable reasons might be "your income was low" or "you haven't been employed long enough." Unacceptable reasons include "you didn't meet our minimum standards" or "you didn't receive enough points on our credit scoring system."

Sometimes you can be denied credit or insurance - or initially be charged a higher premium - because of information in your credit report. In that case, the FCRA requires the creditor or insurance company to give you the name, address, and phone number of the consumer reporting company that supplied the information. Contact the company to find out what your report said. This information is free if you ask for it within 60 days of being turned down for credit or insurance. The consumer reporting company can tell you what's in your report; only the creditor or insurance company can tell you why your application was denied.

If a creditor or insurance company says you were denied credit or insurance because you are too near your credit limits on your credit cards, you may want to reapply after paying down your balances. Because credit scores are based on credit report information, a score often changes when the information in the credit report changes.

If you've been denied credit or insurance or didn't get the rate or terms you want, ask questions:

• Ask the creditor or insurance company if a credit scoring system was used. If it was, ask what characteristics or factors were used in the system, and how you can improve your application.
• If you get the credit or insurance, ask the creditor or insurance company whether you are getting the best rate and terms available. If you're not, ask why.
• If you are denied credit or not offered the best rate available because of inaccuracies in your credit report, be sure to dispute the inaccurate information with the consumer reporting company. To learn more about this right, see How to Dispute Credit Report Errors.

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

Credit Scoring? What Your Score Means

Credit scoring places you in one of three general categories.

• If you have a score of 680 or above, you may be considered an A+ borrower. Your loan will involve basic underwriting, probably through a computerized automated underwriting system and could be completed within minutes. If you are in this category, you have a good chance of obtaining a low interest rate and closing your loan quickly.
  
  
• If you have a score below 680 but above 620, an underwriter will probably take a closer look at your file to determine potential risks. If you are in this category, you may find the process and underwriting time no different than in the past. Supplemental credit documentation and letters of explanation may be required before an underwriting decision is made. You may still be able to obtain "A" pricing, but loan closing may take longer than if you had a higher score.
  
  
• If you have a score below 620, you may not be eligible for the best loan rates and terms offered. Mortgage professionals may divert you to alternate funding sources other than Fannie Mae or Freddie Mac. You may find loan terms and conditions less attractive than ?A? loans, and it may take some time before a suitable funding source is located.

If you do have negative information on your credit report, such as late payments, bankruptcy, or too many inquiries, your best strategy may be to pay your bills and wait. Time is often your best ally in improving credit.

The length of time to rebuild your score depends on the reason behind your low score. Most decreases in scores are due to the addition of a new element to your credit report such as a delinquency or an inquiry. These new elements will continue to affect your score until they reach a certain age. Delinquencies remain on your credit report for seven years. Most public record items remain on your credit report for seven years, although some bankruptcies may remain for 10 years and unpaid tax liens remain for 15 years. Inquiries remain on your report for two years.

While many lenders use these scores to help them make lending decisions, each lender has its own strategy, including the level of risk it will accept for a certain loan product. There is no single ?cutoff score" used by all lenders and there are many other factors used to determine your eligibility and interest rate.

Design of credit score in USA.

In the United States, a credit score is a number based on a statistical analysis of a person's credit files, that represents the creditworthiness of that person, which is the likelihood that the person will pay his or her bills. A credit score is primarily based on credit report information, typically from the three major credit bureaus, namely Experian, Transunion and Equifax.

There are different variants of calculating credit scores. FICO is a credit score developed by Fair Isaac & Co. It is used by many mortgage lenders that use a risk-based system to determine the possibility that the borrower may default on financial obligations to the mortgage lender.

American's are entitled to one free credit report within a 12 month period from each of the three agencies. The three credit bureaus run Annualcreditreport.com, where users can get their free credit report, normally without credit scores. Credit scores are available as an add-on feature of the report for a fee.

In some states, such as California, a consumer is also entitled to a free credit report within 30 days of being denied credit or receiving sub-normal credit terms from a lender due to their credit rating.

What is a Credit history?

This article deals with the general concept of the term credit history, for detailed information about the same topic in the United States see Credit score (United States).

Credit history or credit report is, in many countries, a record of an individual's or company's past borrowing and repaying, including information about late payments and bankruptcy. The term "credit reputation" can either be used synonymous to credit history or to credit score.

When a customer fills out an application for credit from a bank, store or credit card company, their information is forwarded to a credit bureau, along with constant updates on the status of their credit accounts, address or any other changes you may have made since the last time they applied for any credit.

This information is used by lenders such as credit card companies to determine an individual's or entity's credit worthiness; that is, determining an individual's or entity's means and willingness to repay an indebtedness. This helps determine whether to extend credit, and on what terms. With the adoption of risk-based pricing on almost all lending in the financial services industry, this report has become even more important since it is usually the sole element used to choose the annual percentage rate (APR).

How credit rating is determined

Credit ratings are determined differently in each country, but the factors are similar, and may include:

• Payment record - a record of bills being overdue will lower the credit rating.
• Control of debt - Lenders want to see that borrowers are not living beyond their means. Experts estimate that non-mortgage credit payments each month should not exceed more than 15 percent of the borrower's after tax income.
• Signs of responsibility and stability - Lenders perceive things such as longevity in the borrower's home and job (at least two years) as signs of stability. Having a respected profession can improve a credit rating.
• Re-Aging - Through re-aging, a credit history is re-written and you are given a fresh start on that particular account. This can dramatically improve the credit score. In 2000 the Federal Financial Institutions Examination Council (FFEIC) clarified guidelines on re-aging accounts for delinquent borrowers. (PDF)
• Credit inquiries - An inquiry is a notation on a credit history file. There are several kinds of notations that may or may not have an adverse effect on the credit score. Soft pulls don't affect the credit score and are characteristic of the following examples:

A credit bureau may sell a person's contact information to an advertiser purchasing a list of people with similar characteristics, like homeowners with excellent credit. A creditor can check a person's credit periodically. Or, a credit counseling agency, with the client's permission, can obtain a client's credit report with no adverse action. Each of the preceding examples are commonly referred to as a "soft" credit pull.

However "hard" credit inquiries are made by lenders. Lenders, when granted a permissible purpose by a borrower for the purposes of extending his credit, can check his credit history. Hard inquiries from lenders directly affect the borrower's credit score. Keeping credit inquiries to a minimum can help a person's credit rating. A lender may perceive many inquiries on a person's report as a signal that the person is looking for loans and will possibly consider that person a poor credit risk.

• Credit cards that are not used - Although it is believed that having too many credit cards can have an adverse effect on a credit score, closing these lines of credit will not improve your score. The credit rating formula looks at the difference between the amount of credit a person has and the amount being used, so closing one or more accounts will reduce your total available credit. And the lower the percentage of available credit, the more the credit score will drop. The credit formula also factors in the length of time credit accounts have been open, so closing an account with several years of history is another avoidable credit mistake.