When renting an apartment, the landlord requests your credit report. Understanding what that entails can be tough. The Austin Tenants' Council printed the following article that will help you understand what credit is and why it is important.
The credit reporting industry is complicated and can be difficult to understand. Many businesses, including the housing industry, use information found on credit reports. Landlords use credit information most often in the application process to decide whether to lease a property to a tenant. Landlords may report unpaid debts, such as if a tenant breaks a lease and leaves owing money, to credit bureaus. The landlord may also report money owed for property damages. It is legal for landlords to use credit information for these purposes, but there are laws governing credit reporting. This brochure attempts to explain the basics of credit reporting so that a tenant will know what rights are provided by the Fair Credit Reporting Act and other laws and how to enforce those rights.
Credit bureaus, also called credit reporting agencies, gather information about people’s credit history and then sell that information to many different businesses. The major credit bureaus are Equifax, Experian, and TransUnion. Credit information is used by banks, finance companies, insurance companies, employers, merchants, and, of course, landlords. Different businesses use credit information for different purposes. Banks, for instance, want to know if a person will repay a loan, while insurance companies use credit information to determine whether to issue a policy, and even how much that policy will cost. Landlords, on the other hand, want to know how a tenant has handled credit in the past to see if the tenant is a “good” credit risk. They are trying to find a responsible tenant who will pay the rent and fulfill the lease contract.
Three basic types of information are collected by credit bureaus: personal statistics, account information, and legal records. Personal statistics include name, address (past and present), Social Security number, and employment information. When changes of address and employment are listed on a credit application or given to a creditor, this information is reported to credit bureaus.
Account information is the heart of the credit record. It lists debts and how those debts are being paid. Account information covers accounts currently being paid, accounts that have gone to collection, and any charges being disputed.
Credit records are not limited to debt information. They may include legal records of judgments, tax liens, marriages, divorces, arrests, convictions, and other public records. Credit records may seem comprehensive, almost frighteningly so. However, credit records do not necessarily contain all credit information.
Large corporations such as national department stores and banks, along with major credit card companies like MasterCard, Visa, and American Express report information on a regular basis. Smaller creditors such as furniture stores, auto dealers, and gasoline stations may report credit information only if the account becomes past due. This is also true for most management companies and landlords. Therefore, neither all bad credit nor all good credit will necessarily be on a person’s credit record. Furthermore, credit records are not always correct.
Checking Your Credit Record
A tenant is entitled and encouraged to check the information listed at the various credit bureaus to make sure this information is correct. Each credit bureau may have different information listed on its report so it is wise to request a copy of your credit record from each bureau. Visit www.annualcreditreport.com to request a free credit report once every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian, and TransUnion.
Mistakes are often made and will not be corrected unless the consumer discovers the errors and follows the necessary procedures to remove them. If a person is denied credit or denied an apartment because of information supplied by a credit bureau, the Fair Credit Reporting Act requires the creditor (i.e. the landlord) to give the name and address of the credit bureau that supplied the information. If a consumer contacts the credit bureau within 60 days of the denial and requests a copy of the credit information, the credit bureau must supply this information free of charge.
If a consumer has not been recently denied credit or is unaware of any inaccurate information on his credit record, then the credit bureau may charge a fee, not to exceed $8, for the information. The credit bureau is required to disclose all information found in a consumer’s file, except for the person’s overall credit score, risk score, or predictors. Creditors use these evaluations of a credit record as an easy tool to interpret the credit risk of an individual. The credit bureau must enclose with every request a “Summary of Rights” and a comprehensive statement of consumer rights under the Fair Credit Reporting Act.
Correcting Inaccurate Credit Information
If inaccurate information is found on a consumer’s credit record, that person has the right to have that information investigated free of charge. The first step is to dispute the debt by sending evidence that the debt in question is incorrect. Once inaccurate information is disputed both the credit bureau and the creditor have 30 days to investigate the debt. However, the deadline is extended to 45 days if the consumer provides additional relevant information after the initial notice of dispute. Once the investigation is complete, the credit bureau must notify a consumer within five days of the results. Any inaccuracies must be corrected if the debt is to remain. The bureau must also provide the following information in writing:
- A statement that the investigation is complete;
- A revised consumer report;
- Notification that a description of the investigation procedures the bureau used will be supplied within 15 days if it is requested. This information includes the name, address, and telephone number of the creditor who furnished the information;
- Notification of the right to add a statement disputing the debt to the file; and
- Notification that the consumer can require the credit bureau to notify previous users of disputed information.
If the credit bureau investigates the dispute but concludes that the information is correct, the debt will remain on the credit record. But, the debt claim can still be fought. A brief written statement — not to exceed 100 words — explaining why the debt is disputed can be filed with the credit bureau. The credit bureau must include this statement whenever it releases the credit record. Creditors and landlords will then know that this is not just a debt that has not been paid, but a debt that may not be valid.
If a creditor tries to reinsert deleted information, it must certify to the credit bureau that the information is complete and accurate. If that information is reinserted, the bureau must notify the consumer, in writing, within five business days:
- That the disputed information has been reinserted;
- Of the name, address, and phone number of the furnisher of the information (if reasonably available);
- That the consumer has the right to add a statement to the file about the disputed information; and
- The consumer’s right to require the bureau to notify previous users of disputed information.
A credit bureau may stop an investigation if it finds the consumer’s dispute to be frivolous or irrelevant, including a lack of sufficient information in the request. That bureau is required to notify the consumer of its decision to and the reason for the termination of an investigation.
Violation of the Fair Credit Reporting Act by a credit bureau can result in it being held liable for any actual financial losses that result from the violation, punitive damages if imposed by a court, and reasonable court costs and attorney’s fees. Furthermore, the creditor can also be held liable for failing to participate in the resolution of a disputed debt.
How Long Will Bad Debts Be on a Credit Record?
Most negative information, disputed or not, will not remain on a credit record forever. The Fair Credit Reporting Act says that a credit bureau can report negative information for only seven years in most cases. However, the seven years begins from either the date of the last regularly scheduled payment or 180 days from the date of the delinquency if it is placed for collection, charged to profit, or other similar actions. Not all debts are subject to the seven-year rule. Bankruptcies, for instance, can be reported for 10 years, and tax liens can remain for seven years after the date they are paid. Furthermore, if you apply for more than $150,000 of credit; apply for a job paying $75,000 or more; or apply for a life insurance policy with a face value of $150,000 or more, negative credit information can be reported indefinitely.
There is no magical way to remove negative information from a credit record if the information is correct. Anyone who advertises that he can clean credit records can do nothing more than individuals can do for themselves. Some “credit repair” companies or “credit clinics” use the Fair Credit Reporting Act to remove legitimate debts from a credit record. Usually this is accomplished by sending multiple requests for verification of a debt, and if the credit bureau does not verify the debt within a reasonable amount of time, it must be removed. However, the credit bureau can reinstate that debt if it can be verified later.
The only way to get a legitimate debt off of a credit record is to convince the creditor to remove it. This can sometimes be accomplished by working out a payment plan so that as long as payments are being made on the debt, it will not be reported. Another solution is to negotiate a lump sum payment that may be less than the original amount. Old debts are generally worth less to the creditor than recent ones. The creditor may feel that getting something is better than nothing and will settle for less. If any agreements are made, they should be made in writing and signed before any payments are made. Otherwise, the creditor can simply apply the amount paid to the debt and continue to report it. A tenant may want to contact legitimate credit assistance agencies, such as Consumer Credit Counseling, to assist in the process of “repairing” bad credit.
Sometimes negotiation does not work, and the creditor demands the debt be paid. Besides reporting the debt to credit bureaus, creditors can also contact the debtor (the one who OWES) directly, file suit against the debtor, and/or engage a collection agency to collect the debt. Bill collectors may begin contacting the debtor by mail and by phone. While tenants have the legal obligation to repay creditors, they also have protection against certain undesirable collection practices. The Federal Fair Debt Collection Practices Act requires that a collection agency, not the creditor, cease all collection contacts if requested to do so in writing by the debtor. A debtor does not lose this protection no matter how delinquent the bills.
There is also a Texas Debt Collection Law. The following are just some of the practices that the Texas Debt Collection Act makes illegal.
Threats or Coercion
- A creditor uses or threatens to use violence or other criminal means against you or your property to collect a debt.
- A creditor contacts a third person, such as your employer or a relative and tells him that you are refusing to pay a non-disputed debt, when in reality the debt is disputed and you have notified the creditor in writing of the dispute.
- A creditor threatens that he can have you arrested without proper court proceedings for failure to pay a debt.
- A creditor tells you that he will file criminal charges against you, when in fact, you have not violated any criminal law.
- A creditor falsely threatens that after your account is assigned to a collection company, you will no longer be protected by the law and will no longer have a legal defense to the claim.
Harassment or Abuse
- Using profane or obscene language or language that is intended to unreasonably abuse the hearer or the reader.
- Placing telephone calls without disclosing who is making the call and with a willful intent to harass a person at the called number.
- Causing a telephone to ring repeatedly or continuously or making repeated and continuous telephone calls with the willful intent to harass any person at the called number.
- Causing expense to any person in the form of long distance charges for any telephone calls without first disclosing the name of the person making the call.
Unfair or Unconscionable Means
- No debt collector may collect or attempt to collect any interest, fee, charge, or expense unless such additional payment is authorized in a prior agreement signed by the debtor.
Fraudulent, Deceptive, or Misleading Representation
- Using any name other than the true business name of the debt collector.
- Falsely representing that the debt collector has something of value for the consumer to solicit or discover information about the consumer.
- Misrepresenting the character, extent, or the amount of a debt or misrepresenting its status in any judicial or governmental proceeding.
- Using a written communication that simulates or falsely represents to be a document authorized, issued, or approved by a court, an official, or a government agency.
- Using any communication which purports to be from any attorney or law firm, when, in fact, it is not.
Deceptive Use of Credit Bureau Name
- No person may claim to be functioning as a credit bureau or retail merchants association unless that person is in fact engaged in gathering, recording, and disseminating BOTH favorable and unfavorable credit or financial information to prospective creditors for use in the decision making process regarding the extension of credit.
Violation of any of the provisions of the Texas Debt Collection Act is a misdemeanor. Such a misdemeanor charge must be filed within one year of the alleged violation.
Any person may seek relief for actual damages or to prevent or restrain a violation of the act. If the person who brings the suit wins, that person will also be awarded reasonable attorney’s fees. However, if the court finds a claim was brought for harassment or in bad faith, the defendant shall be awarded reasonable attorney’s fees.
A violation of the Texas Debt Collection Act is also a deceptive trade practice and is actionable under the Texas Deceptive Trade Practices Act as well as the Texas Debt Collection Act.
If you believe you have been the victim of an unfair debt collection practice, you may file a civil suit in court, which usually requires representation by an attorney, or may file a complaint with the Consumer Protection Division of the Texas Attorney General’s Office. Once the complaint form and its attachments — or supporting evidence, such as contracts, letters, checks, and receipts — are received in duplicate, the complaint will be reviewed. Never send originals. You should always send copies, keeping the originals for your own files.
First, the Texas Attorney General’s Office (AG) determines if it has jurisdiction to process the complaint. If it does not, the complainant will be referred to the proper agency. If the AG decides to investigate the complaint, it will be done for free. Predicting how long this process will take is impossible. Much depends upon the size of the AG’s current caseload. However, the first step — filing a complaint — is the most important. The AG often looks for a pattern of violations. If no one ever files, it is certain that nothing will be done.
When making the written complaint, be thorough, accurate, and concise. A copy of the completed complaint form will be sent to the person or firm against whom the complaint is filed. The complaint form provides an area where the consumer can describe what he feels would be a reasonable and fair solution to the problem. Give this issue some careful thought. The claim may be mediated and a settlement may be offered based on these suggestions.
The information in this brochure is a summary of the subject and other pertinent matters. It should not be considered conclusive or a substitute for legal advice. Unique facts can render broad statements inapplicable. Anyone needing legal assistance should contact an attorney