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Credit Rating and Credit Reports
It can be difficult for new arrivals in America to establish a credit rating (or ‘line of credit’) or obtain credit without excellent references from an employer or bank. Usually you must have been employed by the same employer for at least a year and earn a minimum salary, although it can still take a number of years to establish a good credit rating. It’s usually even more difficult for self-employed people to obtain credit as most credit applications are geared towards employees. It may, however, be possible to convince your bank through your income tax returns.
Many foreigners find they must build up their credit rating by obtaining credit from local businesses and stores. You should pay all your bills promptly and never bounce cheques. Once you’ve established a good credit rating, you can usually obtain far more credit than is good for you (generally the more you buy on credit, the more credit-worthy you become), and banks, finance companies, credit card companies and other financial institutions will constantly push credit at you (although this policy has been changing in recent years).
In America, everybody’s credit history is maintained by private companies called credit-reporting agencies or credit bureau (e.g. Equifax, TransUnion and TRW). They collect information reported to them by banks, mortgage companies, shops and other businesses. Your credit record contains information such as judgments or liens against you or your property, bankruptcies or foreclosures, as well as failure to pay your debts, e.g. payments on revolving charge accounts. Even late payments may appear on your credit record. Credit companies can legally report accurate negative credit information for seven years and bankruptcy information for ten years. The only information in your credit report that can be changed is incorrect items and items outside the seven or ten-year reporting periods.
If a company denies your request for credit because of your credit report, you must (under the Fair Credit Reporting Act) tell you so and identify the company that supplied the report. All credit reporting companies are required by law to share with you any information they have on file about you. This must be provided free if you’ve been denied credit within the past 30 days; otherwise you can be charged a fee, e.g. between $5 and $20. In some states, credit-reporting agencies are required by law to make an investigation into complaints within 30 days, erase non-verifiable items, provide free reports once a year and provide consumers with the credit-rating scores it gives to lenders. Employers often obtain a credit report on prospective employees, particularly when they will be in a position of financial trust.
If you have a bad credit rating, avoid so-called ‘credit-repair’ companies like the plague. These companies charge from $50 to over $1,000 to ‘fix’ your credit report. In most cases they do nothing at all or nothing you cannot do yourself for free or for a few dollars. Never give anyone advertising easy credit approval or low credit card interest rates your current account number, which may be used to fraudulently withdraw money from your account. Finally, if you’re refused credit, look on the bright side: without credit you cannot run up any debts!
For further information obtain a copy of the Consumer Handbook of Credit Protection Laws available free from the Federal Reserve System, 20th Street, 18 Constitution Avenue, NW, Washington, DC 20551 (202-452-3245, www. federalreserve.gov/publications.htm). Find More information about credit rating >>
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