10 Questions About Credit

By Joseph E. Romero
Loan Education Service Specialist,
1199SEIU Federal Credit Union

Q: What is a quick way to establish credit?

A: Become an authorized user on someone else’s credit card. But make sure the account is in good standing because the status of that account will show up in your credit report.

Q: Can I get credit after filing for bankruptcy?

A: Yes, although bankruptcy stays on credit reports for 10 years, many people have established credit within two years after their bankruptcy filing.

Q: Does negative information always remain on credit reports for seven years?

A: No, the Federal Fair Credit Reporting Act states that negative information may—but do not always—remain on reports for up to seven years. In New York State, negative information must be deleted after five years if the delinquent bill is paid within five years of the delinquency date.

Q: What is the difference between Chapter 13 and Chapter 7 bankruptcies?

A: In a Chapter 7 bankruptcy, all debts are discharged. In a Chapter 13, the filer must make a monthly payment to a bankruptcy court, which in turn pays the creditors.

Q: What is a credit score?

A: They are the three-digit number that lenders use to assess the credit risk of a potential borrower. They range from 300 to 850 and are based on information from the borrower’s credit reports, payment history, number of inquiries regarding their credit and longevity of their accounts.

Q: Can a credit card company increase its interest rate from 0% to 22%?

A: Yes. If your credit report indicates delinquency or you are late on a payment, your rate can rise to 22%.

Q: I’m getting calls from several collection agencies. How can I stop them?

A: Write each agency a letter stating that under the Fair Debt Collection Practices Act, you request all further phone calls cease. You also may fax your written requests. The agency is obligated to cease the calls after receiving your letter.

Q: My salary was garnisheed by a collection agency as the result of a delinquent student loan. Is there any way to stop the garnishee?

A: Yes, under a rehabilitation program. Ask a supervisor at the collection agency to send you the rehabilitation paper work. After you make three consecutive payments of at least $60 each, the agency will stop the garnishee as well as free you to claim your income tax refund, which also could be attached.

Q: How do I correct information on my credit report that I believe to be incorrect?

A: Under the Fair Credit Reporting Act, if you dispute entries on your credit file, the credit-reporting agency must investigate and delete or upgrade those items.

Q: What is a consumer credit counseling service?

A: It is an organization that accepts monthly payments from consumers and disperses the funds to your creditors on a pro rata basis. These organizations claim to convince your creditors to accept their payment arrangements and to reduce interest rates. But none of the aforementioned is a guarantee and the service’s errors can negatively affect your credit report.