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Changes in Credit Laws Favor Consumers

By on January 9, 2011 in Credit

Recent changes in the laws governing credit have been designed to favor consumers. For too long, the laws have benefited the creditors. Starting in July of 2010 and January of 2011, two important changes should make life easier for consumers who find erroneous information on their credit reports.

The Mysterious “Credit Score”

In particular, many consumers have been unhappy with the secrecy surrounding their credit scores. After all, the credit score is calculated using the consumer’s spending habits, finances, and other pertinent factors. Yet somehow, the consumer must pay to receive his actual credit score.

Free Credit Reports

Of course, three free credit reports are available each year- one from each of the major credit bureaus, Trans Union, Equifax, or Experian, but these reports do not include the credit score. If the consumer wants his credit score along with his history, he needs to pay for it.

What happens when the consumer has used up all of his free reports? The consumer must pay to receive a fourth credit report within a year’s time frame. His financial information, his credit score, his credit habits- and yet they are all held hostage because the credit bureaus have their unique formulas needed to calculate credit scores.

The Power of the Credit Score

The consumer’s credit score is often used to determine his interest rate on installment loans and mortgages, the limit on his credit card, whether or not he receives a credit card, the interest rate on his credit card, and even whether or not he receives employment or approval to rent an apartment. If any information on the credit history is negative, it adversely affects the credit score, hurting the consumer’s chances of receiving favorable rates and more.

The Old Method to Eliminate Erroneous Information on a Credit History

Up until 2011, consumers who discovered erroneous information on their credit report had to inform the credit bureau that generated the report and request that the information be removed. The existing laws dictated that the credit bureau had thirty days to investigate and act on this claim of incorrect information being included on the report.

If the information could not be verified or if it was discovered to be incorrect, the credit bureau was legally obligated to remove the information. This process sounds easier than it actually is and could take much longer than thirty days, especially with thousands of complaints being generated each year.

The New Method to Eliminate Erroneous Information on a Credit History

As of July of 2010, consumers who discovered information that they believed to be incorrect on their credit report have the right to contact the business that provided the information and request an investigation. The company must respond to the consumer’s complaint within thirty days. If a mistake is discovered by the business, the erroneous information must be removed.

Access to Free Credit Score for Consumers Denied Credit

However, when a credit card applicant is turned down for a loan or credit card, the creditor must do one of two things. Option #1: The creditor can issue a letter that explains what the problem is to the consumer who will then be entitled to receive a free credit score. Option #2: The creditor can send a free credit score to each consumer who applies for some form of credit through that company.

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