Rights if Denied Credit

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 Why was I Denied Credit?

There are many reasons why an individual may be denied credit. There are regulations that protect individuals when they are seeking and applying for credit.

However, there are no laws that guarantee the individual will receive credit approval. Reasons why an individual’s credit application may be denied include:

  • They do not meet the creditor’s minimum income requirement;
  • They have not been living at your address or working at your job for the required amount of time;
  • They are too near their credit limits; and
  • The information contained on their credit report is incorrect.

What is a Credit Report?

An individual’s credit report can be one of the most important financial documents they have. It is reviewed every time an individual applies for credit and even for some job applications.

An individual’s credit report lists any outstanding debts they have. This includes the status of any credit cards or lines of credit they may own.

A credit report also includes the individual’s credit history. This may include any late payments, such as utility bills and credit card or loan payments.

The main information on an individual’s credit report includes:

  • Consumer information, such as their name and contact information;
  • Consumer statement or summary of credit status;
  • Account history, including specific account information, such as late payments;
  • Public records, including bankruptcy, tax, and criminal records;
  • Credit inquiries including a list of organizations that have obtained a copy of the credit report;
  • In some cases, a credit score.

There are three credit bureaus that most companies use when checking an individual’s credit. These are:

  • Experian;
  • TransUnion; and
  • Equifax.

The majority of credit reports show a report from all three bureaus. However, some reports will only show information from one bureau, so it is important to be aware of what kind of report is being generated.

It is important to note that each of these credit bureaus assigns an individual a credit score. Each credit score is different and they often do not match.

In some cases, a creditor may only check one of these credit scores. This is important information to have when applying for a line of credit.

There are many credit card companies that offer free credit monitoring and provide your credit score free of charge. Other companies may charge a small fee for this information.

It is important to note that an individual is entitled to one free credit report per year. However, this report does not contain their credit score for free.

A person should obtain a credit report at least once a year and check for inaccuracies. If there are mistakes on an individual’s report, they should report them immediately, in writing, to all three credit bureaus.

How is My Credit Score Computed?

A credit score is a summary of an individual’s credit history. It is used by many different types of companies when an individual applies for credit or a loan, such as:

  • Credit card companies;
  • Home equity lenders;
  • Auto loan lenders; and
  • Finance companies.

Even if an individual is approved for a credit card ro a loan, they may have to pay a higher interest rate if their credit score is low. It is important to note that even if an individual is not in debt, having no credit history at all is considered to be just as risky to a creditor considering issuing credit as if the individual had a bad credit history.

There are several factors that are used by credit reporting agencies to calculate an individual’s credit report score. These include:

  • How many credit inquiries have been made, including approved and rejected applications;
  • What the individual’s usual practice is in paying their bills, such as whether they pay on time and if they pay the full amount on time;
  • What types of debt the individual has, including loans, mortgages, credit card debt, bills, etc.;
  • How much outstanding debt the individual has; and
  • The length of their credit history.

The range of possible credit scores is 300-900. The average score is near 750.

There is a direct correlation between low credit scores and high default rates. As an individual’s credit score increases, their risk of default decreases.

What Factors are Illegal For A Creditor To Consider?

There are factors that a creditor may consider when an individual applies for credit. There are, however, some factors and are illegal for a creditor to consider. The factors that a creditor are prohibited from considering include personal information regarding:

  • Sex;
  • Marital status;
  • Race;
  • National origin;
  • Child support; and
  • Public assistance income.

What Can I Do If I have been Denied Credit?

The Equal Credit Opportunity Act provides that all consumers should have an equal chance to obtain credit. It requires the creditor to explain their reasoning when denying a credit application.

The Act requires that the creditor provide the denied applicant with a notice that explains exactly why the application was rejected. The Act also requires that the denied applicant has the opportunity to request an explanation if they ask within 60 days.

Should I Contact My Creditor?

It may be beneficial in some cases to contact the creditor who denied an individual credit. An individual who discusses the outcome of their application with their creditor may be able to obtain extremely beneficial information, such as:

  • How they can decrease their current credit obligation;
  • Which reporting agency provided their report so that they can request a free copy of their credit report to examine for problems or errors; and
  • Whether they can reapply in the future.

Can I Improve my Credit Score in Order to Obtain Credit in the Future?

Yes, there are steps an individual can take to improve their credit score so they may obtain credit in the future. If an individual has no credit, they can start by applying for a small credit card and making regular payments on that card. They may also put a bill in their name, such as a power bill, and make full monthly payments.

Other ways for an individual to improve their credit score include:

  • Paying their bills on time;
  • Updating old accounts;
  • Not maxing out their credit lines;
  • Limiting the number of times they apply for credit;
  • Maintaining their accounts for a long period of time;
  • Staying away from finance companies;
  • Contacting creditors or seeing a credit counselor;
  • Keeping balances low on credit cards;
  • Requesting and checking their credit report; and
  • Managing credit cards responsibly.

Do I Need A Lawyer?

Yes, it is essential to have the assistance of an experienced credit lawyer for any issues regarding your credit. If you feel your credit application has been unjustly denied, your lawyer can review your situation. Your lawyer can also advise you regarding your state’s credit laws and how they apply to your situation.

Debt and credit issues can be a great and stressful burden on anyone. Do not be ashamed or hesitate to contact an attorney to discuss your issues as they may be able to offer advice or solutions you have not considered that will help ease your burden. Your attorney may even be able to help you establish a plan to pay off your debt and increase your credit scores.

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