How to Use this Resource

We hope the articles below help you understand your rights as a consumer. You can scroll through the titles, or sort by Practice Area or Topic. You can also use the search feature to locate information by keyword.

Flitter Milz represents people with a variety of problems involving consumer credit and collections. If you have a particular question or believe your consumer rights have been violated, Contact Us for a no cost consultation.

Seeking Credit

What’s the Difference Between a Credit Score and a Credit Report?

You’ve heard the terms credit report and credit score, but do you know the difference between the two?

What is a Credit Score?

A credit score is a number associated with a person’s credit files to indicate their “creditworthiness”. Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers. Lenders use credit scores as one of various factors in determining who qualifies for a loan, at what interest rate, and at what credit limit. Private companies use special computer programs to determine a credit score based upon a matrix of factors.

What is a Credit Report?

A credit report contains more detailed information than a credit score. It’s a statement that has information about your credit activity showing the  payment history on loans, credit cards, debt, and other financial obligations. Credit reports also list employment, legal, and bankruptcy information. The information listed on your report will in turn affect your credit score. Negative listings, such as a car repossession, can remain on your report for up to 7 1/2 years.

When Should I Check My Credit?

It’s important to check both your credit report and credit score regularly. If you are looking to secure credit for a mortgage, car loan, or personal loan,  get copies of your credit report and check your credit score BEFORE submitting an application for new credit. When a consumer requests a credit report, it is considered as a “soft inquiry” and your credit score will not be affected negatively. Always check your credit reports and scores before you apply for new credit.

Consumers are entitled to receive one free credit report from Transunion, Experian, and Equifax every twelve months.

Get Legal Help

Flitter Milz is a nationally recognized consumer protection law firm that represents victims of inaccurate credit reporting and the problems that stem from errors that are not corrected, such as loan denial, increased interest rates, or lowered credit limits.  Contact Us to discuss problems on your credit report.  There is no cost for the consultation.

 

Co-signing a Loan: All Risk, Little Reward

Co-signers lend their names and good credit histories to the primary borrower, usually when the other borrower cannot obtain credit on his or her own.  For example, a parent may co-sign for a child who does not yet have a credit history. Or, someone may be asked to co-sign by a friend or relative whose credit is tarnished, has negative marks in their credit history, or a low credit score.

Co-signing a loan does not mean that you are serving as a character reference for someone else. Here’s what you should know before you co-sign a loan.

Five Dangers of Co-Signing a Loan

1) You’re Liable

When you agree to co-sign on a loan, you are liable for payment of the loan. You risk having to repay any missed payments immediately, or having to pay the full loan balance if your co-borrower defaults.

If the co-borrower defaults on the loan, the lender can use the same collection methods against the co-signer, such as demanding repayment of the entire loan, filing a lawsuit, and garnishing bank accounts after a judgment.

Credit scores may be impacted negatively by any late payments or defaults by either co-borrower. If the primary borrower dies, loses a job, goes through divorce, files bankruptcy, or otherwise fails to make payments, all responsibility for meeting the terms of the account generally transfers to the co-signer.

In some cases, the person who thought they were merely a co-borrower or guarantor was really listed in auto finance documents as the primary borrower. Be aware that if your co-borrower is primarily irresponsible for timely monthly payments, your credit score could suffer if he or she pays late, even if the lender did not give you a timely notification of the missed payment.

2) You Could Be Sued if Payments Aren’t Made

Failure to pay on the loan (or another breach of the loan agreement, like not keeping up the car insurance) means the lender can come after you for the entire balance. The co-signer often gets sued first because their credit is stronger and the bank believes they’re more likely to repay the debt.

3) It’s Difficult to Remove Your Name from the Loan

Once the account is opened, it’s very tough to remove a co-signer from the loan. We often hear stories of car buyers being told by the salesman to return after four to six months, at which time the dealer will supposedly remove one of the borrowers from the paperwork. This is not true, but rather a tactic to sell cars. Both the primary borrower and co-signer need to satisfy the loan in order to terminate the loan agreement, or obtain the lender’s express permission to remove one of two co-borrowers.

4) Tax Consequences of Settled or Unpaid Debt

The lender might not want to go through the trouble of suing you, so they agree to settle a post-repo deficiency balance for less than the balance owed. This means that you could have tax liability for the difference.

For example, if you owe $10,000 and settle for $4,000, you may have to report the remaining $6,000 as “debt forgiveness income” on your tax returns and pay tax on it. Settling on the account for less than the full sum may also leave a negative mark on your credit report. You may need to seek professional tax advice on this.

5) Difficulty getting approved for a loan

Before you co-sign for someone, think about whether or not you’ll need to use your credit for your own needs. A lender may deny a credit application if there is too much credit in your name or the balances are too high relative to your income.

Seek Legal Advice

Flitter Milz is a nationally recognized consumer protection law firm representing people in matters against lenders, debt collectors and the credit bureaus.  Whether you or the co-borrower has fallen behind on payments or not, Contact Us for a FREE evaluation of whether your consumer rights have been violated.

Why was my Credit Application Denied?

Applications for new credit go through an approval process. The prospective lender has criteria that is considered when reviewing a credit application.  Factors such as the items listed below may have been examined:

–   Your credit and payment history
–   Your income
–   Your total debt to income ratio
–   Multiple applications for credit within a short period
–   Had you filed for bankruptcy
–   Your age
–   Do you need a co-signer

While specific qualification criteria may vary from one creditor to another, a determination is made whether to extend or deny the application. When a credit application is denied, the applicant will receive a letter from the creditor with an explanation of why the credit was declined. Here are some possible reasons behind your credit denial:

Errors on your Loan Application
Your application had errors.  Review your loan application to see whether information was incomplete or misspelled.  Check your identifying information closely for your full name, address, social security number, and birth date. Remember that multiple applications in a short amount of time could also hurt your ability to be approved.

Errors on your Credit Report
Within 60 days of a credit application denial, you may request a free credit report from each of the credit bureaus  —  Transunion, Experian and Equifax. Write to the bureaus for a new report.  Review them for listings that may be inaccurate.  If you see errors, such as duplicate negative listings, accounts that you do not recognize, or incorrect reporting, you must send written disputes to the credit bureaus.  Your dispute letter should include documents that illustrate why the error should be corrected.  Send your letter by Certified Mail, Return Receipt to the credit bureau.  They have 30 days to respond to your dispute.  If the bureaus continue to list the error, you may need to send a second dispute.

Employment History
Review your employment information. Make sure the listings for your employer(s) are accurate.  If there has been a lapse in employment, it could be a factor that was considered for the credit denial.

Credit Payment History
Erratic payment history can also lead to credit denial. Late or missed payments and charged off accounts reflect negatively on your payment history. High balances, collection accounts, and repossessions could also lead to denial.  Also, no credit history could be reason for denial. Creditors may be unwilling to offer credit if you don’t have a well-established credit score.

Public Records
Review your report to see if there are public records listed for bankruptcy, judgments, or tax (or other) liens.  If any of these items have been satisfied, you will need to dispute the listing with the credit bureau and provide documentation showing the obligation has been paid.

Financial Problems
Financial struggles can also be the root of credit denial. Collection accounts and a high debt to income ratio will reflect negatively on your credit history. A high number of credit inquiries are another negative.

Seek Legal Help

Flitter Milz is a nationally recognized consumer protection law firm representing victims of credit reporting privacy and accuracy issues, abusive debt collection contact and wrongful repossessions.  Contact Us to discuss your consumer credit concern.