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     If you are having problems getting credit or paying your

monthly bills, you may be tempted to turn to businesses that

advertise quick and easy solutions to credit problems. But do

not be misled. There are no instant solutions. Although some

credit counseling businesses "guarantee results or your money

back," you may find that there are hidden strings attached or

that the company is gone when you want your money back.


     There are steps you can take to help solve your credit

problems. However, solving them takes time, patience, and some

understanding of the law. This brochure may help you. It

explains why your credit history is important, how to build a

credit history and establish credit, and what can be done to

improve a bad credit history. It also suggests ways to help

deal with debts you may have, possibly by using a nonprofit

Consumer Credit Counseling Service.



Why Your Credit History is Important



     Although creditors usually consider a number of factors in

deciding whether to grant credit, most creditors rely heavily

on your credit history. To learn how you have handled credit in

the past, most creditors obtain a report from your local credit

bureau. Credit bureaus gather and sell credit information about

consumers and are a principal source of information about your

credit history. Your credit bureau report is based on

information supplied over time by your creditors. It also

provides information on where you live and work and may note

other matters of public record such as judgments or

bankruptcies. Your report records payments you have made on

credit cards, installment loans, and other credit accounts and

helps creditors predict whether you are likely to be a good

credit risk. A history of timely credit payments helps you get

additional credit.


     Some creditors are reluctant to grant credit to

consumers-who have not established a "track record" with other

creditors first. In addition, many creditors will not extend

credit to consumers with a history of delinquent payments,

repossession, judgments, or bankruptcy. If you are in either

situation, be wary of ads that promise you "instant credit" or

"a major credit card regardless of your lack of credit history

or your past credit record." The fact is that all legitimate

creditors want to know whether you are likely to be a good

credit risk. Whether you get credit will depend on whether your

qualifications meet the creditor's criteria. No one can

guarantee you credit in advance.



How to Build A Credit History and Establish Credit



     Building a good credit history is important. If you have no

reported credit history, it may take time to establish your

first credit account. This problem affects young people just

beginning careers as well as older people who have never used

credit. It also affects divorced or widowed women who shared

credit accounts that were reported only in the husband's name.

If you do not know what is in your credit file, check with your

local credit bureaus. Most cities have two or three credit

bureaus, which are listed under "Credit" or "Credit Reporting

Agencies" in the Yellow Pages. For a small fee, they will tell

you what information is in your file and may give you a copy of

your credit report.


     If you have had credit before under a different name or in

a different location and it is not reported in your file, ask

the credit bureau to include it. If you shared accounts with a

former spouse, ask the credit bureau to list these accounts

under your name as well. Although credit bureaus are not

required to add new accounts to your file, many will do so for

a small fee. Finally, if you presently share in the use of a

credit account with your spouse, ask the creditor to report it

under both names.


     Creditors are not required to report any account history

information to credit bureaus. If a creditor does report on an

account, however, and if both spouses are permitted to use the

account or are contractually liable for its repayment, under

the Equal Credit Opportunity Act you can require the creditor

to report the information under both names. When contacting

your creditor or credit bureau, do so in writing and include

relevant information, such as account numbers, to help speed

the process. As with all important business communications,

keep a copy of what you send.


     If you do not have a credit history, you should begin to

build one. If you have a steady income and have lived in the

same area for at least a year, try applying for credit with a

local business, such as a department store. Or you might borrow

a small amount from your credit union or the bank where you

have checking and savings accounts. A local bank or department

store may approve your credit application even if you do not

meet the standards of larger creditors. Before you apply for

credit, ask whether the creditor reports credit history

information to credit bureaus serving your area. Most creditors

do, but some do not. If possible, you should try to get credit

that will be reported. This builds your credit history.


     If you are rejected for credit, find out why. There may be

reasons other than lack of credit history. Your income may not

meet the creditor's minimum requirement or you may not have

worked at your current job long enough. Time may resolve such

problems. You could wait for a salary increase and then

reapply, or simply apply to a different creditor. However, it

is best to wait at least 6 months before making each new

application. Credit bureaus record each inquiry about you. Some

creditors may deny your application if they think you are

trying to open too many new accounts too quickly.


     If you still cannot get credit, you may wish to ask a

person with an established credit history to act as your

co-signer. Because a co-signer promises to pay if you don't,

this can substantially improve your chances of getting credit.

Once you have repaid the debt, try again to get credit on your




What Can Be Done to Improve a Bad Credit Report



     You are entitled by law to correct any inaccurate

information that appears in your credit bureau file. If a

creditor rejects your application because of negative

information in your credit bureau report, it must identify the

credit bureau involved. At your request, the credit bureau must

disclose the contents of your credit file. If you act within 30

days of being turned down, there is no charge for this service.


     Check to see whether the information in your credit report

is accurate and complete. You have the fight, under the Fair

Credit Reporting Act, to dispute the completeness or accuracy

of any information in your report. When you do so, it helps to

tell the credit bureau, in writing, why you think the

information is not correct. Unless your dispute is frivolous or

irrelevant, the credit bureau then must reinvestigate the

matter. The credit bureau must correct any information that it

finds is not reported accurately. Information that cannot be

verified must be deleted. If you disagree with the results of

the credit bureau's reinvestigation, you may file a brief

dispute statement explaining your side of the story. At your

request, the credit bureau will note your dispute in future

credit bureau reports.


     Be aware that when negative information in your report is

accurate, only the passage of time can assure its removal.

Credit bureaus are permitted by law to report bankruptcies for

10 years and other negative information for 7 years. There is

nothing that you (or anyone else) can do to require a credit

bureau to remove accurate information from your credit file

until the reporting period has expired. Don't be misled by ads

aimed at people with bad credit histories, judgments, or

bankruptcies. Promises to "repair" or "clean up" a bad credit

history can almost never be kept.



How to Deal with Your Debts



     A sudden illness or the loss of your job may make it

impossible for you to pay your bills on time. Whatever your

situation, if you find that you cannot make your payments,

contact your creditors at once. Try to work out a modified

payment plan with your creditors that reduces your payments to

a more manageable level. If you have paid promptly in the past,

they may be willing to work with you. Do not wait until your

account is turned over to a debt collector. At that point, the

creditor has given up on you.


     Automobile loans present special problems. Most automobile

financing agreements permit your creditor to repossess your car

any time that you arc in default on your payments. No advance

notice is required. If your car is repossessed you may have to

pay the full balance due on the loan, as well as towing and

storage costs, to get it back. Do not wait until you are in

default Try to solve the problem with your creditor when you

realize you will not be able to meet your payments. It may be

better to sell the car yourself and pay off your debt than to

incur the added costs of repossession.



How to Evaluate Credit Repair Companies



     If you are having trouble paying your bills, you may be

tempted to turn to a company that claims to offer assistance in

solving debt problems. Such businesses may offer debt

consolidation loans, debt counseling, or debt reorganization

plans that are "guaranteed" to stop creditors' collection

efforts. Before signing up with such a business, investigate it

thoroughly. Be sure you understand what services the business

provides and what they will cost you. Do not rely on oral

promises that do not appear in your contract. Also, check with

the Better Business Bureau and your local consumer protection

office. They may be able to tell you whether other consumers

have registered complains about the business.


     Consumers who turn to such businesses for help sometimes

encounter additional problems. For example, debt consolidation

or other large short-term loans may have high hidden costs and

may require your home as collateral. An unscrupulous company

may misrepresent the terms of such loan agreements; if so, you

could end up losing your home.


     Businesses offering debt counseling or reorganization may

charge substantial fees or a percentage of your debts, but fail

to follow through on the services they sell. Some may do little

more than refer indebted consumers to a bankruptcy lawyer, who

charges an additional fee. Businesses advertising voluntary

debt reorganization plans or "Chapter 13" relief may fail to

explain that Chapter 13 debt adjustment actually is a form of

bankruptcy. To qualify for it, you must have a source of

regular income and a plan for repaying your creditors that

meets the approval of the bankruptcy court. Businesses that

sell bankruptcy-related services may not tell you all that is

involved or assist you through what can be a complex and

lengthy legal process. Debt problems can be distressing, but be

careful when selecting a solution. Some "solutions" may only

add to your problems.



Where to Find Low-Cost Help



     If you need help in dealing with your debts, you may want

to contact a Consumer Credit Counseling Service (CCCS). This is

a non-profit organization with more than 850 offices located in

50 states. CCCS counselors will try to arrange a repayment plan

that is acceptable to you and your creditors. They will also

help you set up a realistic budget and plan future expenses.

These services are offered at little or no charge to you. You

can find the CCCS office nearest you by checking the White

Pages of your telephone directory or by calling from a

touch-tone phone 1-800-388-2227 to get the telephone number.

However, if you have other questions, contact:


National Foundation for Consumer Credit, Inc.

8611 Second Avenue, Suite 100

Silver Spring, Maryland 20910

(301) 589-5600


     In addition, non-profit counseling programs are sometimes

operated by universities, military bases, credit unions, and

housing authorities. They are likely to charge little or

nothing for their assistance. Or, you can check with your local

bank or consumer protection office to see if it has a listing

of reputable, low-cost financial counseling services.



Where to Find More Information



     The Federal Trade Commission enforces a number of federal

laws involving consumer credit, including the Equal Credit

Opportunity Act, the Fair Credit Reporting Act, the Truth in

Lending Act, the Fair Credit Billing Act, and the Fair Debt

Collection Practices Act. It also provides free brochures

explaining these laws. For these or related publications, such

as Building a Better Credit Record, Women and Credit Histories,

and Credit Billing Blues, write to: Public Reference, Federal

Trade Commission, Washington, D.C. 20580.


     Although the Commission cannot solve individual problems

for consumers, it can act when it sees a pattern of possible

law violations develop. If you have a complaint that may

involve a violation of consumer protection law, write to:

Correspondence B ranch, Federal Trade Commission, Washington,

D.C. 20580.


 fast facts



   * Your credit report records your payments on credit cards,

     installing loans, and other credit accounts. It helps

     creditors predict whether you are likely to be a good

     credit risk.


   * Be wary of ads that promise you "instant credit" or "a

     major credit card regardless of your lack of credit

     history or past credit record."


   * If you are rejected for credit, find out why. You can get

     a free copy of your report if you request it from the

     credit bureau that provided it, within 30 days of being

     turned down.


   * Check to see whether the information in your credit report

     is accurate and complete. You are entitled by law to

     correct inaccurate information that appears in your credit

     bureau file.


Bureau of Consumer Protection
Office of Consumer & Business Education
(202) 326-3650

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