There’s no doubt that managing your credit is a fundamental part of living in the US. Good credit can help you access better interest rates, nicer homes, and even better jobs. Meanwhile, bad credit can prevent you from improving your situation, even if it wasn’t your fault.
That’s why it’s so important to understand your rights under US credit laws. A lot of legislation covers what information credit reporting agencies (CRAs) are allowed to record, how they can share it, and what it can be used for. If you understand your rights under these laws, you can better respond to credit problems and potentially improve your score significantly. Keep reading to learn more about the five most important laws that govern your credit and what they mean for you.
The Truth in Lending Act
One of the first credit laws ever passed was the Truth in Lending Act (TILA). This 1968 law requires all lenders to accurately inform borrowers about elements of the loan they want to take out, including its length, the annual percentage rate (APR), and the total amount the borrower will pay, including interest.
TILA also bars creditors from recommending borrowers take out unfavorable loans to improve their investments. In short, TILA is responsible for making lenders give you honest, accurate, and comprehensive information about any loans you request and preventing them from giving you harmful financial recommendations.
The Fair Credit Reporting Act
In 1970, the federal government first passed the Fair Credit Reporting Act (FCRA), which requires CRAs to ensure that your report is accurate and your financial information is kept confidential. The law also lets you view your report in full, for free, once a year.
Under the FCRA, you have the right to dispute any inaccurate information on your report. Many types of erroneous information hurt your score, so this right is critical to keeping your score high.
For instance, if a typo by one of your creditors causes the CRA to believe you’ve missed a payment, your score could drop as much as 110 points. In almost every case, that’s enough to drop creditworthiness a level, from “Excellent” to “Good” or “Fair” to “Poor.” You can use the FCRA to check your report and dispute incorrect information like this to ensure your score remains where it should be.
The Equal Credit Opportunity Act
The single most crucial credit law is 1974’s Equal Credit Opportunity Act (ECOA). This bill allowed everyone in the country to access fair financial opportunities. Before the ECOA, women were often barred from open loans without their husband’s permission, and minorities were often charged exorbitant interest rates due to their race.
The ECOA has other benefits, too. It bars institutions from considering any non-financial factors in their decisions. If an institution denies you a loan, refuses to raise your limit, or closes your account, it also must send you an explanation for that decision within 60 days.
This law remains important because discrimination is unfortunately still too common. If you suspect you’re being denied financial opportunities due to your race, gender, religion, or other non-financial information, you may be able to take legal action under the ECOA.
The Fair Debt Collection Practices Act
The Fair Debt Collection Practice Act (FDCPA) was written shortly after in 1977 and received a significant update in 2010. This act limits what debt collectors can do when attempting to collect money you owe. It includes specific rules about how they can contact you, what they need to tell you, and what you can do to stop them. For example:
Under this law, you can tell a debt collector to stop contacting you entirely. If you request verification of the debt, the collection agency cannot contact you about it again until they send you proof, such as a bill from the original creditor. If you do not think the debt is yours, you can tell them to stop contacting you permanently, and they must do so. Afterward, they may only reach out to you to inform you of the actions they will take instead.
The Credit Repair Organizations Act
The 1996 Credit Repair Organizations Act (CROA) regulates so-called “credit repair” services that claim to help people improve their credit. It requires these services to explain exactly what they can and cannot do to improve their scores. It also requires them to inform potential customers about their rights to access their own reports and dispute information on their own.
Finally, the CROA bans these services from requiring advance payment and allows consumers to cancel the contracts under specific circumstances. This demonstrates how little faith the federal government places in supposed repair services compared to what consumers can do independently.
Make the Most of Your Credit Rights
Federal law gives you plenty of tools to manage your credit. You can view your report, dispute inaccuracies, and force collections agencies to stop contacting you if they have the wrong person.
Of course, just because you have certain rights under the law doesn’t mean that others will respect them. If you’re being pursued by debt collectors for a debt that isn’t yours, or if you’ve disputed an error on your report and it’s still there, your rights may be violated. You can get help resolving debt and credit problems for good by contacting the expert credit attorneys at the Law Offices of Todd M. Friedman, P.C. Schedule your consultation today to learn how our attorneys will help you take legal action against agencies that won’t respond to your requests.