How to improve your credit score

How to improve your credit score

Category:
Loans
Date:
21/10/2014

Are you thinking about applying for credit? If so, you need to make sure your credit score is in order. Lenders will rate your credit profile to see if youre a suitable candidate before youll be accepted for that loan, credit card or mortgage, and having no credit history at all can be just as detrimental as having a less-than-perfect one. But, there are ways you can improve your credit score to boost your chances of being approved…

  • Make sure youre registered at your current address. A lot of lenders use the electoral roll for identity verification in order to combat identity fraud, so if youre not registered to vote at your current address, its highly likely that youll be automatically rejected. So, make sure youre registered with the electoral roll at the correct address before you even think about applying for credit.
  • Build up a credit history. Lenders will look at your previous credit information to decide if youre a suitable candidate, and your history becomes even more important if youre making a particularly hefty request (such as applying for a mortgage). But, if youve never had a credit card, loan or overdraft, you wont have a credit history, and this could pose difficulties – how will lenders know whether or not youre a credit risk if they cant evaluate your past performance? This means that if you want to secure that credit agreement, its worth establishing a positive credit history by taking out a credit or store card first. Doing so can prove your money management skills and can be a great way to build up your score, but of course, youll need to pay off the cards balance in full each month.
  • Keep balances as low as possible. Try not to have credit card balances that are more than 30% of your limit – doing so could be an indication to lenders that you already use too much credit and may not be able to keep up with additional repayments, which could lead to your application being rejected. As a general rule of thumb, keep balances as low as possible, while still using a bit of your limit to prove your credit-worthiness.
  • Close any account that isnt needed. Lenders are paying increasingly close attention to the amount of credit available to an individual, and if it seems youve already got access to a lot, they may be reluctant to offer you any more. That means any accounts you dont use or need should be closed as soon as possible by, for example, cancelling a credit card that youve paid off and will no longer be using.
  • Stop applying! If youve been refused credit by a lender, dont keep applying elsewhere. Each credit search will leave a footprint on your file and too many in a short space of time could indicate that youre financially over-stretching yourself (or, perhaps, that youre desperate for money and could be a credit risk), and that means they may not approve your application.
  • Keep on top of your credit score. Its a good idea to regularly check your credit score to make sure everything is as it should be, particularly if youre thinking of applying for a mortgage (or other large credit agreement) in the near-future, and if it isnt as peachy as hoped, youll know the areas you should focus on to improve it. Itll also highlight any discrepancies, and if you dont agree with anything on your file, contact the credit reference agency. If youve been refused credit, you should get a copy of your credit report to check it over, and if you dont agree with anything (such as CCJ settlements not being recorded, or even fraudulent activity), make sure to contact the agency to put things right – updating your file with the correct information could help ensure you wont be refused credit in the future.

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Muthoot Finance Launches Housing Loan Down Payment Product

Muthoot Finance has launched a new scheme to finance margin money needed to avail of home loans. As per norms, a home loan borrower has to contribute 20 per cent margin money (equity) to avail a housing loan for up to 80 per cent of the propertys value.

Many prospective home buyers fail to get a housing loan because they do not have margin money that runs into several lakhs.

The new product will cater to home loan seekers, who have difficulty in paying the margin money upfront, the companys AGM (marketing) Avinav Chaubey said.

The product, designed for the down payment of a new property or renovation or extension of an existing property, will have a repayment period of five years. No property or income documents are required, he added.

The rates under the new scheme are cheaper as compared to personal loans, Muthoot Finance said. Under the plan, customers can avail a loan of Rs 1 lakh to Rs 10 lakh at an interest rate of 11 per cent interest rate for a period of 12 to 60 months.

Muthoot has also launched a new consumer loan scheme to offer convenient credit options to customers for buying consumer durables. The EMI-based loan service can be cleared within 36 months, the company said. The scheme does not include any Negative Area concept – a ground used by many lenders to reject loan applications.

Muthoot will provide instant finance, up to 100 per cent of the product value, without the need of CIBIL score or credit card. There are no processing charges and an exclusive zero down payment facility is offered to all customers, the company said.

(With inputs from PTI)

How to avoid the credit mistakes 20-somethings make

The world of credit and finances can be daunting when youre in your 20s and just setting out on your own. Many of us tend to avoid those areas of our lives that are a bit scary, but keep in mind that your credit and finances are two of the most dangerous areas to ignore. So lets agree to face these fears, and avoid making the mistakes that could haunt you for many years to come.

In my experience, I see mainly two kinds of 20-somethings, those who steer away from having any kind of credit and thus have yet to build a credit score and history; and those who take any and every credit offer available to them, rack up huge debts and will wake up sometime in their 30s deep in financial trouble and even deeper in regret.

Whats wrong with both of these scenarios? Perhaps the worst mistake of all: a lack of planning for the future. Whether youre ready for it or not, your future will come and when it does (usually quicker than expected), you will likely want to buy a home, maybe a new car, perhaps even help your future kids through school and maybe even leave a financial legacy that will outlast your time here. If you want any or all of these things you need to have a plan now.

Establish a Good Credit History

If you dont have credit or a credit score, you can start small by getting a store credit card or a secured credit card. Pay one of your regular monthly bills like your cellphone bill with it. Pay off or pay down the balance each month making sure to keep the balance below 20 percent of the total available credit line. This is a good way to optimize the Amount of Debt factor of your credit score, which accounts for about 30 percent of your score. Make all your payments on time, because your payment history makes up 35 percent of your credit score. Over time, this will lead to a good, strong credit history.

If you have a lot of credit card debt and are having trouble making your payments, try to focus on paying down all of your balances to 20 percent or less of your available credit. It may help to focus on paying down one account at a time while maintaining on-time, minimum payments on all the others. If you have trouble with spending too much, stop carrying your credit cards while you pay down balances.

Maintain Healthy Credit and Finances

Once you have begun to establish a healthy credit history, you just need to continue doing the right things. To keep improving your credit score and building a credit history worthy of a home mortgage you will need an established, long-running reputation of conservative borrowing and on-time payments.

So how do you know if your efforts are leading to good credit? You can find out by pulling your credit reports regularly and make sure theyre accurate you can get them for free every year from the major credit reporting agencies. You can also track your credit scores to follow your progress. Credit.com offers two of your credit scores for free, along with an overview of how your credit file is affecting your scores, and a plan to help you work your way toward better credit.

Yes, your 20s is the best time to get in the habit of managing your credit, finances and life responsibly. Good luck! And if you have any questions, please let me know. Im here to help you every step of the way.

More from Credit.com

How to Improve Your Credit Score
Does Checking My Credit Score Hurt My Credit?
What#39;s a Good Credit Score?

Happy with your credit score? Don’t let one of these mistakes unravel it

Achieving a credit score you can be proud of is a big accomplishment. But it’s important to remember that good credit is a journey, not a destination. You have to keep making the right money moves to hold onto that score you’ve worked so hard to attain.

Here are three common mistakes that could cause your good credit to unravel fast – be sure to avoid them if you want to keep your score on the straight and narrow!

SEE ALSO: Credit cards: Here’s what not to do

1. Paying a non-credit bill late

Most people know that paying their bills on time is the key to achieving good credit. After all, payment history makes up 35% of your FICO score, so it’s smart to focus on getting those bills in by their due dates.

Yet, many people mistakenly believe that only credit-related bills (like loans) will affect their scores. This sometimes leads them to be careless about paying non-credit bills (like rent or utilities) on time.

But this is a really bad idea. It’s true that most utility companies and landlords don’t report your payments to the three major credit bureaus on a monthly basis. However, if you get behind on one of these bills, your account could get turned over to a collection agency. This will likely result in a black mark on your credit report that could stick around for as long as seven years.

The takeaway? Pay all your monthly bills on time, no matter what.

2. Applying for too much credit at once

If you’ve struggled to get approved for credit in the past because of a low score, you might think that now is the perfect time to apply for a few new cards. But not so fast – 10% of your credit score is determined by new credit inquires. The FICO model interprets several card applications in a short period of time as a sign of financial instability and, therefore, credit risk. Your score could take a hit as a result.

It’s tough to say exactly how much space you should put between credit card applications to avoid doing damage to your score – this really depends on your individual credit profile. For most people, getting a new card every six months or so is usually safe.

And be sure you’re only applying for credit you actually need. Getting every hot card that hits the market isn’t a good long-term strategy.

SEE ALSO: 3 ways your credit card could be your ticket to a great credit score

3. Not paying attention to your credit utilization

Many people think that as long as they’re paying their credit card bills on time and in full, they have nothing to worry about, credit score-wise. While it’s true that these are two important steps to good credit, there’s something else to keep in mind: your credit utilization ratio.

This number is calculated by dividing the amount you owe on your card(s) by the total amount of credit you have available. So, if you have a credit card with a limit of $5,000 and your current balance is $2,000, your credit utilization ratio is 40%.

It’s important to keep your credit utilization ratio below 30% at all times, because the 30% of your credit score determined by amounts owed is heavily influenced by this number. Even if you end up with a $0 balance on your card at the end of every month, your issuer might report what you owe on your account before you make a payment. This could end up hurting your score, even though you’re not carrying a balance from month to month.

Your best bet is to monitor your balance carefully throughout the month, and make a payment if you start creeping above the 30% utilization mark on any of your cards. This one little trick will go far in keeping your score intact, so be sure to keep it in mind.

Lindsay Konsko writes about credit, credit cards, and other personal finance topics for NerdWallet. Our tools and resources empower consumers to make informed financial decisions.

Avoiding credit mistakes 20-somethings make

The world of credit and finances can be daunting when youre in your 20s and just setting out on your own. Many of us tend to avoid those areas of our lives that are a bit scary, but keep in mind that your credit and finances are two of the most dangerous areas to ignore. So lets agree to face these fears, and avoid making the mistakes that could haunt you for many years to come.

In my experience, I see mainly two kinds of 20-somethings, those who steer away from having any kind of credit and thus have yet to build a credit score and history; and those who take any and every credit offer available to them, rack up huge debts and will wake up sometime in their 30s deep in financial trouble and even deeper in regret.

Whats wrong with both of these scenarios? Perhaps the worst mistake of all: a lack of planning for the future. Whether youre ready for it or not, your future will come and when it does (usually quicker than expected), you will likely want to buy a home, maybe a new car, perhaps even help your future kids through school and maybe even leave a financial legacy that will outlast your time here. If you want any or all of these things you need to have a plan now.

Establish a good credit history

If you dont have credit or a credit score, you can start small by getting a store credit card or a secured credit card. Pay one of your regular monthly bills – like your cellphone bill – with it. Pay off or pay down the balance each month making sure to keep the balance below 20% of the total available credit line. This is a good way to optimize the Amount of Debt factor of your credit score, which accounts for about 30% of your score. Make all your payments on time, because your payment history makes up 35% of your credit score. Over time, this will lead to a good, strong credit history.

If you have a lot of credit card debt and are having trouble making your payments, try to focus on paying down all of your balances to 20% or less of your available credit. It may help to focus on paying down one account at a time while maintaining on-time, minimum payments on all the others. If you have trouble with spending too much, stop carrying your credit cards while you pay down balances.

Maintain healthy credit and finances

Once you have begun to establish a healthy credit history, you just need to continue doing the right things. To keep improving your credit score and building a credit history worthy of a home mortgage you will need an established, long-running reputation of conservative borrowing and on-time payments.

So how do you know if your efforts are leading to good credit? You can find out by pulling your credit reports regularly and make sure theyre accurate – you can get them for free every year from the major credit reporting agencies. You can also track your credit scores to follow your progress. Credit.com offers two of your credit scores for free, along with an overview of how your credit file is affecting your scores, and a plan to help you work your way toward better credit.

Yes, your 20s is the best time to get in the habit of managing your credit, finances and life responsibly. Good luck! And if you have any questions, please let me know. Im here to help you every step of the way.

More from Credit.com

How to improve your credit score
Does checking my credit score hurt my credit?
Whats a good credit score?

Credit.com is a USA TODAY content partner offering financial news and commentary. Its content is produced independently of USA TODAY.

UNEMBARGOED: Shuttleworth case has greater implications

THE decision of the Supreme Court of Appeal to award information technology entrepreneur and billionaire Mark Shuttleworth his money back plus interest could have far greater implications than may appear on the surface.

One of the success stories of the Trevor Manuel-Pravin Gordhan combination as finance minister and South African Revenue Service commissioner respectively was to convince us to let the government take whatever amount of money it wanted from our bank accounts without having to explain too much. Correctly, many South Africans regard tax evasion as a serious matter but our spirit of compliance has been misused for quite some time.

In addition to levying income taxes and other duties, which all of us have to pay, the government has taken to relying entirely on tax to avoid doing the rest of the work it is supposed to do. The nub of Shuttleworth’s case was that tax is not a control measure and must not be used as one.

The Reserve Bank could have, for instance, simply instituted a rule that prevents individuals from transferring out of SA more than a given amount of money in a defined period. The government chose not to do this, and instead imposed a punitive tax, which it then went on to deny was a tax. This attitude is not surprising because it has pursued a questionable philosophy for some time, and got away with it. Hopefully this plunder shall continue no more.

Here are a few examples. Some years ago it imposed an emissions tax on cars. This tax is built into the price of a car and increases according to the carbon emissions level of the engine size concerned. This means a BMW X5 with an 8-cylinder engine elicits a higher tax than a 4-cylinder vehicle.

The intention is to discourage people from buying cars with large engines, which hasn’t worked so far, of course. The tax is still there, however, with no mention of what other measures and incentives are going to be put in place to stop this continuing damage to the atmosphere.

If the intention is to prevent environmental damage, then surely the government must be worried. It could outlaw passenger cars with big engines completely, a step I would agree with. I doubt they will be doing this anytime soon, however, because tax revenue gets affected.

There is another massive cash cow on the way, the carbon tax. The intention is equally noble — to promote correct attitudes and behaviours in industrial firms. Sasol and Eskom are the two biggest polluters in the country at the moment, but there are others.

Smelting and refining installations are the other culprits, as are cattle and the copious amounts of methane gas they emit, but cows can’t pay tax so let’s give them a break.

Once again there are instances where there are alternative technologies that can be used in order to save the environment from permanent damage. In other instances there are no alternative technologies. Smelting and refining are constantly improving but for now there is no other way.

This means that despite the best intentions of companies to behave correctly, it is simply impossible to comply, so they end up paying the tax. Again, this would swell the coffers of government and support the fiscus (in the very short term) but not solve the problem. The greenhouse gases will continue being chucked into the sky at exactly the same rate they were the day before the tax became effective.

After a decade we would have collected and spent a lot of money but not solved the problem. There are those, like me, who would accept the tax if it were to be ring-fenced and used for renewable and clean energy research to build the capacity to solve the problem permanently. We could also use some of it to invest in the green economy Economic Development Minister Ebrahim Patel appears to be so passionate about. This suggestion is unlikely to succeed because that is just not government’s philosophy.

The last example pertains to the so-called sin taxes on alcohol and tobacco. Once more the intention appears to be noble but the blunt instrument is arbitrary and borders on irrationality in its application. Alcohol abuse is so high Health Minister Aaron Motsoaledi must be developing a chronic ulcer. It is also hugely damaging when one considers the violence, car accidents and relentless tragedies visited upon families every day.

I suspect Police Minister Nkosinathi Nhleko is frustrated with the level of violence at social gatherings where drunk acquaintances and friends elect to kill and maim one another. He may prefer that people were educated about the dangers of alcohol, and those who already abused it taken to rehabilitation programmes so that his police can focus on other, equally serious crimes, but this is unlikely.

One would think a sizeable portion of these taxes would be used for education and rehabilitation programmes, but no. Why do that when you can just tax people who don’t even care and use the money to pay for everything else?

I hope the Shuttleworth case begins a necessary discussion about how the government uses its power to levy taxes and the purpose for which those taxes get used. Some say taxes don’t work like that, but that is rubbish. How they work now is a result of a decision, which can be altered if good reasons arise.

How to Avoid the Credit Mistakes 20-Somethings Make

The world of credit and finances can be daunting when you’re in your 20s and just setting out on your own. Many of us tend to avoid those areas of our lives that are a bit scary, but keep in mind that your credit and finances are two of the most dangerous areas to ignore. So let’s agree to face these fears, and avoid making the mistakes that could haunt you for many years to come.

In my experience, I see mainly two kinds of 20-somethings, those who steer away from having any kind of credit and thus have yet to build a credit score and history; and those who take any and every credit offer available to them, rack up huge debts and will wake up sometime in their 30s deep in financial trouble and even deeper in regret.

What’s wrong with both of these scenarios? Perhaps the worst mistake of all: a lack of planning for the future. Whether you’re ready for it or not, your future will come and when it does (usually quicker than expected), you will likely want to buy a home, maybe a new car, perhaps even help your future kids through school and maybe even leave a financial legacy that will outlast your time here. If you want any or all of these things you need to have a plan now.

Free Credit ScoreGet your FREE Credit Score More in less than 90 seconds. FREE and updated every 30 days. Checking your score wont hurt your credit.
Its FREE. Get Started. gt;gt;gt;

Establish a Good Credit History

If you don’t have credit or a credit score, you can start small by getting a store credit card or a secured credit card. Pay one of your regular monthly bills – like your cellphone bill – with it. Pay off or pay down the balance each month making sure to keep the balance below 20% of the total available credit line. This is a good way to optimize the “Amount of Debt” factor of your credit score, which accounts for about 30% of your score. Make all your payments on time, because your payment history makes up 35% of your credit score. Over time, this will lead to a good, strong credit history.

If you have a lot of credit card debt and are having trouble making your payments, try to focus on paying down all of your balances to 20% or less of your available credit. It may help to focus on paying down one account at a time while maintaining on-time, minimum payments on all the others. If you have trouble with spending too much, stop carrying your credit cards while you pay down balances.

Maintain Healthy Credit and Finances

Once you have begun to establish a healthy credit history, you just need to continue doing the right things. To keep improving your credit score and building a credit history worthy of a home mortgage you will need an established, long-running reputation of conservative borrowing and on-time payments.

So how do you know if your efforts are leading to good credit? You can find out by pulling your credit reports regularly and make sure theyre accurate – you can get them for free every year from the major credit reporting agencies. You can also track your credit scores to follow your progress. Credit.com offers two of your credit scores for free, along with an overview of how your credit file is affecting your scores, and a plan to help you work your way toward better credit.

Yes, your 20s is the best time to get in the habit of managing your credit, finances and life responsibly. Good luck! And if you have any questions, please let me know. I’m here to help you every step of the way.

More on Credit Reports and Credit Scores:

  • What’s a Good Credit Score?
  • How to Get Your Free Annual Credit Report
  • How Credit Impacts Your Day-to-Day Life

Image: Ammentorp Photography

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Watch out for these credit score hazards

Those are considered nuisance collections, Sprauve said, and may include some parking tickets, as well as other small bills, such as library fines.

But any amount over $100 is taken into account, and the black mark remains on your credit report for up to seven years. Even if you pay the bill after it has gone to collections, the blemish will not be erased from your report.

It will show lenders that you made good on the debt, which helps, Sprauve said. But it doesnt go away. (Over time, the impact on your score will lessen, though, because the FICO rating system gives more weight to recent credit behavior.)

Opening new lines of credit. When you apply for a new credit card or loan, lenders will make whats known as a hard inquiry on your credit report (a hard inquiry is when a lender reviews your credit report).

These inquiries can have a slight negative effect on your score much less than a bill thats sent to collections but you still want to be cautious about applying for more credit than you need.

What the score looks for is if someone is opening a lot of new credit in a short amount of time, Sprauve said. Those inquiries could be an indication youre a higher risk for debt repayment.

Certain exceptions are made if, say, youre applying for a mortgage or auto loan. The FICO score recognizes you may be rate shopping (within a 45-day period) and will not penalize you.

But other inquiries will count against you. Be sure to know when inquiries are made too. Rental car agencies, for example, will review your report when you rent a car with a debit card.

If youre essentially paying with cash, a rental car agency needs to know if youre a good risk, Roisman said.

Closing a credit card. Finally, while you dont want to open too many lines of credit, you also dont want to hastily close old accounts.

The length of your credit history makes up 15 percent of your score. An additional 30 percent of the score is determined by how much of your available credit youre using. If you close an old credit card, you could hurt your rating by both shortening your credit history and raising your ratio of debt to available credit.

Want to learn more? Go to http://www.myfico.com/crediteducation.

yourmoney@tribune.com

How to earn school credit and help animals

In addition to earning school credit, you and your classmates will bond over your shared passion for animals, and several dogs and cats will reap the benefits too. You can start by forming an afterschool club. Before you talk to your teachers, be prepared by visiting the Human Society of the United States online website. They have lots of information on how to get started.

4 Consumer Rights You Didn’t Have 40 Years Ago

In 1974, if you wanted to watch a television show, you’d better make sure you were near a TV when it aired, because chances are you didn’t have any way to record it. Grocery store employees put price tags manually on every item in the store, and then manually entered them into the cash register when you made a purchase, because items didn’t have bar codes. The first one was used that year to purchase a pack of gum.

Things were a lot different 40 years ago, including credit.

  • If you were a woman applying for credit, you may have experienced a lender asking you to get your husband, father or even your brother to co-sign for you.
  • Shopping for a credit card? You probably had no clue what the cost would be until you applied and received the card in the mail.
  • And forget about getting a free credit report. Not only did you have to pay to see your credit data, you probably had to take off work and visit the local credit bureau to purchase it.

This month marks the 40th anniversary of some landmark legislation in consumer rights. Here are four consumer credit rights you didn’t have 40 years ago, and the legislation that came along and changed it all.

1. The Right to a Loan No Matter Your Race, Gender or Religion

This federal law, enacted in 1974, made it illegal for creditors to discriminate against credit applicants on the basis of race, color, religion, national origin, sex, marital status or age (provided the applicant had the capacity to enter into a contract). Before this legislation was enacted, women often had a difficult time establishing credit on their own. It was not unusual for a creditor to ask questions about things like their marital status or whether they planned to have children (when a creditor assumed they would drop out of the workforce).

ECOA also made it unlawful for creditors to discriminate against applicants because all or part of their income came from a public assistance program such as welfare, from retirement income such as Social Security or a pension, or from child support or alimony (as long as it’s regularly paid and likely to continue).

It may be a little hard to understand the impact of this legislation now, at a time when credit decisions are often automated, making credit largely colorblind as well as gender neutral. But imagine yourself in the early 1970s as a divorced working mother who can’t get credit because she doesn’t have a husband or other male family member to apply with her. Or imagine yourself as a person of color can’t get credit due solely to the color of your skin. In a recent speech at Michigan State University, the director of the Consumer Financial Protection Bureau Richard Cordray said, “This statute expressly prohibits discrimination in all manner of financial credit transactions, thus affirming that economic rights are civil rights.”

That’s not to say the system is perfect now. In fact, the CFPB recently took action against a major auto lender, fining them more than $80 million for charging African-American, Hispanic, and Pacific Islander customers higher interest rates. It was because of this law, though, that the agency was able to recover the settlement for borrowers – and send a message to other lenders to follow the law.

2. The Right to Understand Your Credit Card Terms Before You Apply

Shopping for a credit card? Hopefully you’ve taken a look at the basic interest charges and fees the card issuer has presented in table format. This disclosure of the basic cost of a credit card is often credited to Charles Schumer (then a US representative  from New York, now a senator) who championed legislation to disclose the cost of credit cards to consumers upfront. It was enacted in 1989 and the box that lists the basic information is known as the “Schumer Box.”

It requires credit card issuers to disclose basic costs including the:

  • interest rate (APR) for purchases, transfers and cash advances
  • annual fee (if applicable)
  • other fees
  • grace period

Before this legislation, it was not uncommon for a credit card solicitation to tout the features and benefits of the card in advertisements, but fail to mention the cost. Consumers would apply for a card and receive it before they actually found out the fees and interest they would have to pay.

Again, this law isn’t perfect. With the rise in risk-based pricing, a lender may disclose a range of interest rates and you don’t know the rate you’ll get until the issuer checks your credit and your application is approved.

See Where You StandSign up at Credit.com and get your FREE Credit Score plus personalized Action Plan to help you improve it. FREE and updated every 30 days.
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3. The Right to Dispute Your Credit Card Bill

If you have ever refused to pay for a credit card charge, you have the federal Fair Credit Billing Act to thank for your right to dispute it. That law, enacted in 1974, gives you the right to dispute certain credit card purchases and withhold payment on them while the issuer investigates.

Under the FCBA, you can dispute a charge for a purchase under several scenarios, including:

  • You didn’t make it.
  • It is for the wrong amount.
  • You did not receive the goods or services.
  • Goods were not delivered as agreed or were damaged upon delivery.

You can also dispute credit card bill if you find an error in the lender’s calculation or if a statement wasn’t sent to you and you provided a change of address far enough in advance.

You generally have 60 days to dispute a billing error, and once you do, you can withhold payment on the disputed amount. The issuer must investigate and get back to you within roughly two billing cycles.

The “less-than-perfect” part? Many consumers don’t realize that you maintain your rights under this law only by putting your dispute in writing. Calling your issuer may be an easier way to lodge a complaint, but it doesn’t protect your rights. Your best bet is to make sure you send your dispute by certified mail following the instructions on your billing statement, and keep a paper trail.

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4. The Right to Free Credit Reports

Sometimes referred to as the FACT Act, or FACTA, this law in 2003 gave consumers the right to a free credit report once per year from any national consumer reporting agency.  As a result, AnnualCreditReport.com was developed as a central place to request it. Prior to that, consumers paid to get their reports. (There were several states that already required credit reporting agencies provide citizens with free copies of their credit reports.)

This law also provided consumers with a variety of other protections including fraud alerts and credit freezes if they were victims of identity theft and improved dispute procedures. But it is the free report that really changed the game for consumers. Before FACTA, lenders who obtained credit reports often couldn’t even show them to the consumers who were the subjects of the credit reports. In other words, a car dealer could be sitting across the desk from a consumer telling him about a problem in his report, but under its contract with the credit bureaus, couldn’t share that report with the consumer.

FACTA gave consumers the right to free credit reports, but not to free credit scores. You can, however, see your credit scores for free on sites like Credit.com.

More on Credit Reports and Credit Scores:

  • How to Get Your Free Annual Credit Report
  • How Do I Dispute an Error on My Credit Report?
  • How Credit Impacts Your Day-to-Day Life

Image: iStock

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