Fair Credit Reporting Act Explained
Your credit report can affect numerous aspects of your life. It impacts your ability to get credit and the amount you pay for it, but that’s not all. It can also affect your insurance rates, employment prospects and even your ability to rent a place to live.
Keeping our credit reports accurate and private is of the utmost importance. This is why the government created the Fair Credit Reporting Act (FCRA). Enacted in 1971, this law contains several provisions that govern how credit reports are maintained and used.
Terms of the FCRA
* Only certain organizations with legitimate business reasons may request an individual’s credit report. These include creditors, employers, insurers, and in certain cases, government agencies. Other parties can only receive your credit report if you request it for them.
* Credit reporting agencies may distribute names and contact information of those for whom they maintain files for marketing purposes. You can, however, request that they do not distribute your information, and they must comply. Requests may be made by phone or mail.
* If a lender or other party denies credit or takes other adverse action based on information contained in a credit report, they must notify the consumer in writing. They must also provide the name and contact information of the bureau from which the report was obtained.
* Consumers are entitled to a free copy of their credit reports if they are denied credit or subjected to other adverse action based on information contained therein. They may also receive one free copy of their report from each bureau once a year under the Fair and Accurate Credit Transactions Act, an amendment to the FCRA that was passed in 2003. Credit bureaus may charge a fee for additional reports.
* Errors on your credit report may be disputed by writing to the credit bureau. The credit bureau must investigate your claim within 30 days, and if they find that the information was erroneous, they must remove it and notify the other major credit bureaus. If they do not remove the information, you may add a summary explanation to your report stating why you disagree with the decision.
* The amount of time that negative information may remain on a credit report is governed by the FCRA. Delinquencies must be removed no later than seven years from the original delinquency, and bankruptcies must remain on the report for no longer than ten years.
The FCRA makes it easier for us to keep track of the information on our credit reports, and it protects us from improper use of that information. Knowing our rights under this legislation can help us maintain an accurate credit report, which will make it easier to obtain credit.
Definition of Identity Theft
There has been much talk about identity theft over the past several years, but it is not a new concept. Thieves have been stealing the personal information of others to use for their own benefit throughout history. But in today’s electronic age, identity theft has become rampant.
Identity theft is a form of fraud. It involves the use of someone’s personal information or documents by the fraudster, usually to obtain money in some way. But there are also other ways that a stolen identity may be used. Some illegal immigrants steal identities to prevent deportation. Criminals may use stolen identities to prevent their crimes from showing up on their records. Identity theft has even been used to obtain medical care and prescription drugs.
How Are Identities Stolen?
In the days before computers, identity thieves often resorted to dumpster diving. That means that they stole victims’ trash and went through it, looking for information they could use. They looked for such things as canceled checks with the victim’s bank account number, address and phone number, and discarded credit card offers. Some identity thieves also stole mail in an effort to find personal information. These techniques are still used today but are usually less fruitful thanks to consumer awareness.
Pickpocketing is another age-old identity theft method. Stealing someone’s wallet could score the thief credit cards, a photo ID, and possibly even a Social Security Card. Newer techniques with similar goals include compromising credit card readers and remotely reading information from RFID chips used in some credit cards and passports.
The use of computers by businesses to store customer information has opened up new opportunities for identity thieves. Hackers can breach the security on such computers and find a wealth of personal information. Some companies also send information to credit bureaus on removable media such as tapes or CD-ROMs, creating another target for identity thieves.
Phishing has become a favorite activity of the high-tech identity thief. This involves posing as a trusted bank or company and sending emails to its customers, or to a general email list that may include some customers. These emails ask recipients to click a link and verify their information, but instead of taking them to the bank’s website, the link goes to a site owned by the identity thief. Once personal information is entered, it can be retrieved and used by the criminal.
These are the most common methods of identity theft, but not the only ones. Identity thieves are constantly coming up with new ways to get the information they need. That’s why it’s so important to keep an eye on our credit reports.
Dangers of Identity Theft
Having your possessions stolen is a harrowing experience. Theft obviously deprives you of property, but perhaps even worse, it shakes your confidence in your fellow human being. You may experience such emotions as fear, anger, and anxiety.
When someone steals a material possession, at least we usually know fairly quickly that it’s gone. But when someone steals one’s identity, it may go undetected for weeks, months or even years. By the time you realize what has happened, your life may be turned upside down. Picking up the pieces is a long and frustrating process, and it’s possible that you may never undo everything that the identity thief has done.
Identity theft can have numerous effects on its victims. Some of these include:
* The thief could steal money from your bank account or run up the balance on your credit card. With a checkbook, credit card or debit card, an identity thief can easily access your funds or an existing credit line. There are liability limits when a credit card is used fraudulently, but no such limits apply to checking or savings accounts.
* The identity thief could open new accounts in your name. With the right information, anyone can apply for a loan or credit card using your identity. If approved, that person can then use the credit card or loan proceeds as he pleases and not bother making payments. The bills will be in your name, and if you do not pay them, it will be your credit rating that suffers.
* The damage to your credit report from identity theft can make it difficult or impossible to obtain new credit. Any credit you do receive will carry a higher interest rate than you would normally be entitled to.
* The negative entries on your credit report can make it much harder to get a job or rent a place to live. Employers and landlords often check applicants’ credit reports, and when they see delinquent accounts, they will usually move on to the next applicant.
* Having your identity stolen could land you in jail. Some identity thieves do what they do to avoid jail time or keep their criminal records clean. They may commit fraud using a stolen identity, or they might give authorities someone else’s name when they’re taken in for a crime. If someone uses your identity for such a purpose, the police could come after you.
If you want to protect your identity, one of the most important things you can do is keep an eye on your credit report. No matter how well you protect your information and important documents, an identity thief could target your employer or a company with which you do business and get everything he needs. Checking your credit report periodically will alert you to any strange activity so that you can take steps to avoid further damage.
The Three Major Bankruptcy Types Explained
Sometimes people end up with more debt than they can handle. Often it is not due to irresponsibility, but to circumstances beyond one’s control. Job loss, unexpected medical expenses and other such situations can cause finances to take a sudden turn for the worse. When such things happen, bankruptcy can ease the financial burden.
Bankruptcy should only be used when all other alternatives have been exhausted. It remains on your credit record for ten years, making it difficult or impossible to obtain loans and other types of credit. But in some cases, it is a debtor’s only hope for relief. If you’re considering bankruptcy, it’s important to know which type is best for your situation.
Chapter 7 is the most common type of bankruptcy for individuals. It requires the debtor to turn all non-exempt property over to a trustee. The trustee then liquidates the property, distributing the proceeds to creditors to lower the debt. The remainder of the debt is usually discharged, as long as it doesn’t fall into categories that are ineligible for discharge.
Those filing for Chapter 7 bankruptcy must pass a means test to show that they are unable to repay their debts. Generally, they must have a total income below the mean income for their family size in their state. Those who do not qualify for Chapter 7 usually qualify for Chapter 13.
Most Chapter 11 bankruptcies are filed by businesses, but individuals are also eligible for this type of bankruptcy. This type of bankruptcy is costly and complicated and is only appropriate for individuals under certain circumstances that involve large amounts of debt and assets.
In Chapter 11 bankruptcy, the business (if applicable) may continue to operate. A repayment plan must be written and approved by creditors and the bankruptcy court. A trustee is not appointed unless there has been some sort of wrongdoing by the filing party.
Chapter 13 bankruptcy is the second most common type of bankruptcy filed by individuals. In order to qualify, debtors must have an adequate amount of disposable income and their debt must fall below limits set each year.
Instead of turning over assets and having the debt remaining after their liquidation discharged, the debtor proposes a repayment plan in which he will repay creditors over a period of three to five years. Creditors may object to the payment plan, but the bankruptcy court has the final say as to whether it is accepted. The debtor is allowed to keep his property, and he pays creditors a reduced amount.
Bankruptcy is not something to be taken likely, but sometimes it is necessary to help debtors get a fresh start. A bankruptcy attorney can help determine whether you should file, and if so which type of bankruptcy is appropriate for your situation.