Dealing with credit problems

You might find yourself invaded by problems with creditors and credit. But you’ve got rights to help you sort things out. 

With almost 200 million consumers in the credit-reporting system, mistakes are inevitable and problems are sure to crop up. Stolen cards, lost payments, billing errors, and disputes with lenders can all cause you grief as well as harm your potential for getting credit in the future. But as long as you know your rights and take a few precautions, it’s not hard to take action if problems come up.

Your first step should be a preventive one. Hold on to all of your credit-related information and paperwork, including receipts from purchases you make using credit cards until those charges appear on your bill, billing statements, canceled checks used to pay credit bills, credit agreements, and policy changes, and anything and everything else that seems important. That way you’ll have evidence to back you up in case of any disputes.

Truth, lending, and the American way

When you apply for credit, you’re protected against discrimination under the Equal Credit Opportunity Act (ECOA). The ECOA states that lenders cannot reject credit applicants on the basis of race, sex, marital status, age, national origin, or the fact that you receive government assistance. In fact, they’re required to consider public assistance in the same light as other forms of income.

You’re also protected in any credit agreement by the Truth-in-Lending Act, also known as Regulation Z. Under Regulation Z, lenders have to tell you in writing certain terms of the credit they’re offering before you borrow from them.

Ask nicely

If you’re usually an exemplary credit customer, you can sometimes persuade your lender to let you off the hook if you go over your credit limit, or if your payment arrives late. Try asking the customer service representative to waive any charges or interest. If you’re polite as well as persistent, and their records show months of prompt payment, there’s a good chance you’ll escape the charge. Just don’t try it too often.

It’s even possible to talk a creditor out of raising your APR. There’s often no reason for these increases other than the issuer’s desire to make more money. Politely pointing out your history as a good customer may get them to back off. If they won’t, you may want to investigate finding a new credit card.

Fitting the bill

If you find what seems like an error in a credit billing statement, you’re entitled to dispute it under the Fair Credit Billing Act. This law defines billing errors as:

• Charges that you, or other people authorized to use your account, didn’t make
• Incorrect credits or payments, or ones that show the wrong amount or date
• Charges for items that you didn’t accept on delivery, or that weren’t delivered as agreed upon
• Computational errors
• Failure to deliver your billing statement to your current address with 20 days’ notice of an address change

Doing your part

If you receive a statement you believe to be incorrect, you have 60 days from when it was mailed to notify the creditor in writing. Be sure to write to the address for billing inquiries, and to include your name and account number as well as an explanation of which portion of your bill you think is incorrect.

The company then has 30 days to acknowledge your letter, and 90 days to resolve the problem. During this time you are free to use the card, and while you should pay all parts of your bill that aren’t in dispute, you don’t have to pay the disputed amount, or any finance charges that it incurs.

Some creditors are quick to respond to queries and complaints, while others may stall, insist you’re the one in error, or otherwise make your life difficult. If you’re involved in a long-term credit relationship, as you might be with a mortgage or car loan, you may just have to be persistent and patient.

But since you have such a choice of credit cards, there’s no reason not to cancel your account if you find that your card company seems unwilling to respond to your inquiries or slow to get them resolved. But even if you cancel a card, you’ll still have to resolve all outstanding issues and payments.

Freeze!

Once you dispute a credit billing issue, the creditor you’re dealing with can’t release potentially damaging information about that charge to other creditors or credit reporting companies.

Rejections and reports

If you’re denied credit, you’re entitled to know why. So contact the lender. There’s always the possibility that the decision was based on incorrect or inaccurate information. One study found that 29% of all credit reports contain errors that could result in your being denied credit. Another pegged it at 33%. As simple a mistake as misspelling your name can mean your credit history gets mixed up with someone else’s.

If you’ve been turned down, the lender has to tell you which credit report contains the damaging information. Ask the credit bureau for a copy of your report – it’s free if you ask within 60 days of being rejected. If you find that your report does contain an error, notify the credit bureau that issued it and the lender that rejected you immediately. The Fair and Accurate Credit Transactions Act requires that they both investigate your dispute – although they’re not required to make any changes to your report if they don’t think the change is warranted.

Check your report again 90 days after you contact the credit bureau and lender. If it hasn’t been changed as a result of your complaint, you’re entitled to write an explanatory comment of 100 words or less that must be included in all future reports.

 

This article originally appeared in Your Retirement Center, a free retirement education resource from Mutual of America, a Mission:Money sponsor.