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Consumer Sourcebook

Preface | User's Guide | Table of Contents | Print Sourcebook Adobe Acrobat Reader Symbol

Credit Reporting

We rely on credit to purchase houses, cars, clothing, and even restaurant meals. While we expect credit to be readily available to us, those who lend us money and issue credit cards want to know whether we are good credit risks before extending the credit. Creditors, employers, insurance companies, and landlords can legally gain access to information about our credit histories (who has lent us money or extended credit, how much, our repayment record, and so forth) by businesses known as credit reporting agencies or credit bureaus. A credit reporting agency is essentially an information collector of consumers' credit payment histories, disclosing the data to those businesses or individuals with a legitimate business need for it.

The information that credit reporting agencies collect about us and our credit transactions is, by its very nature, sensitive information. A major concern is that the information collected and disseminated is accurate. An error in a person's credit file can lead to a denial of credit for an otherwise good credit risk, or it can lead to granting credit to someone who is a poor risk. Denying credit to someone who is a good credit risk may result in that person not getting a credit card, being unable to finance a car, or buy a house. Granting credit to someone who is a poor credit risk may result in the credit grantor never receiving full repayment of the debt, which raises the costs to other people borrowing from that lender.

In addition, many people consider their personal financial matters to be private and do not want them disclosed to persons who are not entitled to that information. The questions of who has the right to gain access to the information in our credit files and what protections need to be enacted to preserve the confidentiality of that information have become increasingly important in recent years. For more information on credit records and privacy, see For Your Information … Credit Records.

The Law

Both federal and New Hampshire laws restrict credit reporting agencies' dissemination of consumer credit information to only those persons with a direct and immediate need for it, and require that the credit information be current and accurate.

The federal Fair Credit Reporting Act and New Hampshire's RSA 359-B are designed to limit the purposes for which a report can be issued to businesses or individuals. A credit reporting agency may furnish a report to a person that the reporting agency reasonably believes has a legitimate need for that information, such as:

  • A government agency
  • A person who may hire the consumer or issue an insurance policy to the consumer
  • A person intending to use the information in connection with a credit transaction involving the consumer (collection, review or extending credit)
  • A person intending to use the information to determine whether to issue a license or other privilege to the consumer
  • In response to a court order
  • In response to the consumer's written request for his or her own credit report

Example: Allrite Insurance Company has received an application from Rhett Butler for a $10 million life insurance policy. Allrite wants to know if any of Butler's personal financial circumstances make him a poor risk to put in its life insurance risk pool, so it asks The Grande Credit Bureau for a report on Butler's personal finances. The request is permissible under the law, even if Rhett has not given written permission to issue the information.

The credit reporting laws are intended to make it convenient for consumers to find out what information is in their own credit reports. To get a copy of their own reports, consumers can:

  • Appear in person at the local credit bureau with proper identification
  • Call the credit bureau by telephone and submit proper identification
  • Send a letter to the credit bureau, enclosing proper identification
  • Access the credit bureau's Web site to make the request online

Note: Some people believe it is inappropriate or unlawful for a credit reporting agency to require individuals to disclose their social security numbers in order to get a copy of their own credit reports. Both state and federal laws indicate that a social security number can be one of the required forms of identification requested by a credit reporting agency. For identification purposes, a social security number lessens the risk that the agency will give the wrong credit report to the consumer.

Credit reporting agencies must disclose the following information to the individual:

  • The sources of all information in the report
  • The nature and substance of all information in the report at the time of the consumer's request, except medical information
  • The identity of all persons who received the report for employment purposes within two years of the request
  • The identity of all persons who received the report for any reason within six months of the request

To comply with the credit reporting laws, reporting agencies must use reasonable procedures to assure the greatest possible accuracy of the credit report. The reporting agencies report what creditors send so the information they receive may not always be accurate. You should periodically check the credit files that each reporting agency active in your area is maintaining on you to make sure the information is accurate. If a creditor sends inaccurate information, inaccurate information will appear in your file. For example, information may be added to the wrong person's file if the names are similar.

Example: Allrite Insurance Company receives an application from Rhett Butler for a $10 million life insurance policy. Allrite wants to know if any of Butler's personal financial circumstances make him a poor risk to put in its life insurance risk pool, so it asks The Grande Credit Bureau to issue it a report on Butlers' personal finances.

The Grande issues the report, and Allrite denies the policy when it learns from the report that Always There Finance Co. obtained a $9.5 million dollar judgment against Butler two months before he applied for the insurance, and Always There has begun proceedings to "execute" the judgment by forcing the sale of Butler's house. Allrite must tell Rhett that it got the report from The Grande, and give him The Grande's address.

The Grande issues the report, and Allrite denies the policy when it learns from the report that Always There Finance Co. obtained a $9.5 million dollar judgment against Butler two months before he applied for the insurance, and Always There has begun proceedings to "execute" the judgment by forcing the sale of Butler's house. Allrite must tell Rhett that it got the report from The Grande, and give him The Grande's address.

A consumer who is denied credit, insurance, employment or other benefits, based on the information in a credit report, must be given the name of the credit reporting agency issuing the report.

Consumers who are denied credit or other benefits can get a copy of their credit reports without charge from the named credit reporting agency. The request needs to be made within 30 days of being notified that credit, or other benefits, were denied on the basis of the report.

Example: Rhett Butler applies to the Goodforus Loan Company for a $45,000 loan. The credit report received by Goodforus on Rhett Butler from The Grande Credit Bureau states that (1) Always There Finance Co. obtained a judgment against Butler for $9.5 million, (2) Butler has an 8-year-old gambling conviction, and (3) Butler has an unpaid tax lien on his house. Goodforus denies the loan application based on the information in the credit report. Rhett gets a copy of his report and disputes all three pieces of information.

The Grande Credit Bureau investigates and finds: (1) there really is a judgment for $9.5 million, (2) the gambling conviction is "stale," (past the 7-year limit) and (3) there was no tax lien, simply a notice of a tax "sale" which, under the laws in Rhett's state is not the same as a lien. The Grande removes items (2) and (3), and at Rhett's request, notifies Goodforus of the changes. Rhett adds a statement to his report indicating that a loan from Always There to his business was secured by his personal guarantee, his business failed, and Always There brought suit on the guarantee. Rhett, of course, still may not get the loan.

The Grande Credit Bureau investigates and finds: (1) there really is a judgment for $9.5 million, (2) the gambling conviction is "stale," (past the 7-year limit) and (3) there was no tax lien, simply a notice of a tax "sale" which, under the laws in Rhett's state is not the same as a lien. The Grande removes items (2) and (3), and at Rhett's request, notifies Goodforus of the changes. Rhett adds a statement to his report indicating that a loan from Always There to his business was secured by his personal guarantee, his business failed, and Always There brought suit on the guarantee. Rhett, of course, still may not get the loan.

The Fair and Accurate Credit Transaction Act (FACTA), an amendment to the Fair Credit Reporting Act, allows us to request a copy of our credit report once every 12 months free of charge. A central Web site and a toll-free telephone number have been established to facilitate the processing of the free credit reports. You can order your free annual report online through http://www.annualcreditreport.com. Or call toll-free 877-322-8228. You can also write for a free report by mailing the "Annual Credit Report Request Form" to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. If you request your report online, you will be able to access the report immediately. If you request your report via the toll-free telephone number or through the mail, your request will be processed and mailed to you within 15 days.

Creditors do not always send credit information to all three credit reporting agencies. Therefore, you may want to request a report from each of the three nationwide agencies: Equifax, Experian, and TransUnion.

To get your free annual report you must prove your name, address, Social Security number, and date of birth. If you have moved recently, you may need to provide your previous address. You will also be asked for some piece of information that only you are likely to know in order to maintain the security of your file.

For your information … More Rights Concerning Credit Reports

We now have some expanded rights in getting mistakes on our credit report corrected:

  • If you provide evidence of an error in your credit report, the mistake must be corrected.
  • Providers of credit information are required to investigate all disputed charges and information.
  • Disputed information, once removed from your credit file, cannot be reinserted unless it is found to be accurate at a later date.
  • You have the right to remove your name from lists to be "pre-approved" for credit card offers.
  • National credit bureaus must maintain staffed, toll-free telephone number services to respond to consumers' inquiries.

The law restricts credit reporting agencies from using old or stale information in credit reports. The following is a list of some types of information that may not be kept in a credit report:

  • Paid tax liens older than seven years
  • Bankruptcies older than 10 years
  • Accounts placed for collection or written off as a bad debt that are more than seven years old
  • Arrest, indictment or conviction of a crime older than seven years, and lawsuits and judgments older than seven years or until the applicable statute of limitations has expired, whichever is longer
  • Any other unfavorable information more than seven years old

Negative information may be reported indefinitely only under three circumstances: if you apply for a life insurance policy with a face value of $150,000 or more, or if you apply for a job paying $75,000 or more and the employer requested a credit report in connection with the application, and there is no time limit on reporting information about criminal convictions.

For your information … Credit Records: Privacy and Other Concerns

Potential creditors, landlords, life insurance companies, and employers can access your credit record. Some businesses check a potential customer's credit rating to decide if a deposit will be required. But not everyone has the right to access your credit report. Car dealers may pull your credit records while you are on a test drive. Cellular phone services have been known to check a potential customer's credit ratings before the customer signs any agreements. By law, these businesses really have no right to do this unless you are actually applying for credit. To keep credit record "snooping" to a minimum:

  • Never reveal your social security number unless you are actually applying for credit
  • Never allow anyone to photocopy your driver's license

Too many inquiries for your credit report can actually lower your credit rating. Multiple inquiries are viewed as a prelude to bankruptcy. Even if your credit record is clear, a flurry of inquiries over a short period of time may be detrimental to you. This is especially true for home mortgage applicants. Therefore, if you plan on buying a home or refinancing your mortgage, be careful about what else you apply for because inquiries on your credit report could act against you.

Too much available credit can also be a problem. Even if your credit record is clear, just having access to a large amount of open-ended credit could jeopardize a mortgage or other loan application. For example, if you have a VISA, MasterCard and Discover Card all with $7500 credit limits, you have access to $22,500 in credit.

Although lenders will say "good credit leaves you nothing to fear," if your loan application is turned down, look to the causes listed here. You may be able to plead your case with the loan officer.

If you are planning on applying for a home mortgage or other loan, you might consider the following:

  • Keep only as many credit cards as you truly need. Do not apply for any new ones.
  • Pay all your bills punctually.
  • Pay down high credit card balances. Do not charge anything new.

If you want to stop receiving credit card solicitations, contact OptOut, a national service sponsored by the three major credit bureaus, at 1-888-5OPTOUT or 1-888-567-8688 (toll-free). Your name will be removed from the marketing lists of all three major credit bureaus.

Points To Remember

  • Married women should make sure that they have credit in their own names while married. A woman who has not had credit in her own name during her marriage may find it difficult to establish credit quickly if she divorces or if her husband dies.
  • Paying rent and utilities on time by check is one way of establishing a record of repayment.
  • If you apply for credit or insurance, are seeking a job, or trying to rent an apartment, your credit record may be examined.
  • Get a copy of your credit report once a year, or before a major purchase, to check for accuracy. This is especially important if you have a common name or a name that is often misspelled (you might want to check to see if you also have a credit report under your misspelled name).
  • Read the report carefully. If you don't understand the notations, ask the credit reporting agency to explain them.
  • Dispute any inaccurate information by writing to the credit reporting agency. Be specific about what is wrong with the report. Send copies of any documents that support your claims.
  • If the credit reporting agency does not resolve your complaint about the information in your report to your satisfaction, you have the right to include a 100-word statement giving your version of the disputed information.
  • If you find an error on your credit report with one credit reporting agency, the same error may be included in other reporting agencies' reports as well. Contact all three major agencies for copies of your report.

Where To Go If You Have A Problem

Your annual free copy of your credit report can be obtained in several ways:

Annual Credit Report
Phone: 1-877-322-8228 (toll free)
Mail: send the "Annual Credit Report Request Form" to:

Annual Credit Report Request Service
PO Box 105281
Atlanta, GA 30348-5281

To get a copy of your credit report, contact the following credit reporting agencies. Include the required identification (photocopy of your drivers license and a current billing statement or other document with your name and address):

TransUnion
PO Box 1000
Chester, PA 19022
1-800-916-8800 (toll-free)

Equifax
PO Box 740241
Atlanta, Georgia 30374-0241
1-800-685-1111 (toll free)

Experian
PO Box 214
Allen, TX 75013-0949
1-888-EXPERIAN (888-397-3742) (toll free)

The New Hampshire Consumer Protection and Antitrust Bureau is authorized to enforce the state fair credit reporting laws. If a credit reporting agency or user of information "willfully" violates the laws, it is liable for the actual damages, "punitive" damages, and other costs and attorneys' fees incurred by the consumer. If an agency or user of a credit report negligently violates the laws, it is liable for the consumer's damages, costs and attorney's fees. Generally, an action under New Hampshire's Fair Credit Reporting Act must be brought within two years from the day on which the statute was violated.

NH Consumer Protection and Antitrust Bureau
33 Capitol Street
Concord, NH 03301-6397
603-271-3641

For your information … Specialty Credit Reports

Credit reporting agencies compile information on consumers over-and-above credit information. Medical records and payments, rental history, check writing history, employment history and insurance claims are also part of our credit files. The Federal Trade Commission (FTC) requires that any company that collects this kind of information on consumers have a toll-free number for ordering a free copy of a specialty report.

Not everyone may need to check their specialty report every year. A specialty report should be ordered and checked for accuracy before looking for new homeowners insurance or auto insurance, before applying for private health insurance or for life insurance, before opening a new checking account, or before renting a home or apartment.

If you find errors in your specialty report, you have the same rights to dispute as with errors found in a credit report.

For information on specialty reports online:

Privacy Rights Clearinghouse – Insurance
Privacy Rights Clearinghouse – Medical
Privacy Rights Clearinghouse – Employment background Checks

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New Hampshire Department of Justice | 33 Capitol Street | Concord, NH | 03301
Telephone: 603-271-3658