Protecting yourself from credit discrimination
In America, everybody is supposed to get a fair shot at landing
credit. The Equal Credit Opportunity Act sees to that.
Under the law, creditors may not discriminate against you because
of your sex, age, marital status, race, color or national origin,
or because you receive income from public assistance.
This law protects you from discrimination in every aspect of a
credit transaction from your application to the terms and interest
rate of your loan to the servicing of your loan.
"It's really any stage of the credit process from application
to collection," says Deanne Loonin, staff attorney at the National
Consumer Law Center.
If you were turned down for credit or were offered less favorable
terms, the Equal Credit Opportunity Act also gives you the right
to find out why.
Originally designed to protect women
When the Equal Credit Opportunity Act was first passed back in 1974,
the key aim was to expand the credit rights of women.
At that time, single women had trouble qualifying for credit without
co-signers. Married women had trouble qualifying for credit without
their husbands' help.
The law was expanded a couple of years later to offer protections
for race, national origin and age. A lender may not consider any
of these factors when deciding whether to grant you credit.
The Act also determines what questions a lender may
and may not ask you.
Other factors considered
The aim of this law is to give everyone a fair shake at landing
credit. But it does not guarantee that everyone that applies for
credit will qualify.
Your income, expenses, debts, payment record and credit history
are all key factors that lenders look at when evaluating credit
If you are turned down for credit or offered credit at less favorable
terms, make sure you read every single word of the rejection letter.
Under the law, after receiving a completed credit application,
a creditor has up to 30 days to tell you if your application is
rejected or accepted.
A rejection letter may feel like a slap in the face, but as tempting
as it may be to just tear it up, don't. If you do, you'll be ripping
up some of your rights.
"The first reaction is to be angry and throw it away,"
says Sandra Wilmore, an attorney in the division of financial practices
at the Federal Trade Commission. "But they should read it because
they have important rights spelled out in that notice."
In a rejection letter, a creditor must either tell you the specific
reasons your credit application was rejected or tell you how it
can be contacted to find out those reasons.
Act quickly to exercise your rights
Some creditors will ask you to call a toll-free number or send a
letter to a special address to find out why you didn't qualify for
credit. It's best to do so quickly. Under the law, you only have
60 days to ask for this information.
And thanks to the law, a lender must give you specific reasons
as to why you didn't qualify for credit. Nothing vague will do.
"They can't just say, 'You didn't pass our credit-scoring
system,'" Wilmore says. But a lender could say, "Your
income is too low" or "You haven't been with your job
long enough" or "You don't have enough revolving accounts"
or "Your credit report shows late payments."
Those are all concrete reasons.