Credit History

by Jim Slaughter

Originally published as "Good Credit History Key to Health of Finances" in The Business Weekly of the Greensboro News & Record

"Neither a borrower nor a lender be," advised Shakespeare. Unfortunately, borrowing is all to common and can be unavoidable during a slow economy. The key is not to become an excessive borrower.

In early North Carolina history debtors could actually be imprisoned at the will of their creditors. Fortunately, the use of Debtors' Prison diminished in the mid 1800's. Prior to this time, several of our state's best-known citizens spent time in jail for owing money, including Judge Archibald Debow Murphey in 1829.

Although imprisonment is no longer a concern, out-of-control debt loads remain serious. Creditors may obtain judgments against a debtor. Credit can be ruined. Personal property may be taken.

Credit Check

The first step in avoiding a bad credit situation is to determine your credit status.  This can be done by obtaining a credit report. Credit reports are available from credit-reporting agencies.

Credit-reporting agencies, or credit bureaus, gather, store, and provide information relating to the financial habits of individuals. Creditors use these reports to make lending decisions. As a result, credit transactions succeed or fail every day based on credit reports.

The Fair Credit Reporting Act provides that anyone may gain access to their own credit file. If you have been denied credit in the last 30 days, a credit bureau must provide your credit history free of charge upon request. Your credit history may be obtained at other times for a small fee.  

Your credit report contains information about your types of accounts, your past and present payment history, and whether you have ever been sued or filed bankruptcy. Most information regarding past-due accounts, lawsuits, or judgments remains on a credit report for seven years. Any form of bankruptcy may remain on a report for ten years. If information on your credit report is in error, corrections should be made immediately.

The importance of reviewing your credit history cannot be overemphasized. It is not unheard of for individuals with excellent credit to suddenly learn they are overextended. Sometimes in such circumstances, someone else's credit history and the individual's have become merged. Such mistakes are rare, but a simple credit check could have avoided this disaster.

Debt Collection

The North Carolina Legislature has gone further to assist debtors than simply abolishing Debtor's Prison. In 1977 the General Assembly passed laws based on the federal Fair Debt Collection Practices Act. These statutes restrict the actions of bill collectors in our state.

The North Carolina Act provides that debt collectors may not use unfair threats or coercion in their collections. For example, it is improper to suggest that nonpayment of a debt will result in arrest. Threats to use violence or any illegal means to cause harm to the debtor, his reputation, or his property are also illegal.

It is also illegal to oppress, harass or abuse a debtor in collecting on a debt. To "oppress" or to "harass" are defined broadly and include the use of profane or obscene language. Calling at unreasonable hours of the night is a violation. Even direct contact with a creditor who is represented by an attorney is improper. If a debtor states that he does not want to be called at work, the debt collector must respect these wishes, unless there is no other place to contact him.

"Unreasonable publication" of consumer debts is also prohibited. Improper publication includes any communication seen or heard by persons other than the debtor that display information about the alleged debt other than the name, address, and telephone number of the debt collector. Publishing or posting any list of debtors, including posting bad checks, is usually improper.

As can be seen, North Carolina laws provide some protection for debtors regarding the collection of debts. The better path, though, is to avoid the need for these laws altogether. Careful planning and tight budgeting are less difficult than repairing a bad credit history.

Articles are intended to provide general information and are not legal advice or a legal opinion. Specific questions should be directed to an attorney at Law Firm Carolinas or to another lawyer.

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