Turnips can bleed: The Portfolio Recovery story

Here’s an interesting article about surprising things that can hurt your credit score. The article explains how the following can hurt your credit:

• Closing credit cards or account.
• Debt settlement.
• Payment plans.
• Inquiring about old debts.
• Having a credit limit lowering.
• Paying off an old collection account.
• Balance transfers.
• Neglecting old debts.
• Cancelling older credit cards.
• Library fines.

For those of you trying to improve your credit, the article is worth a read for things you shouldn’t do. I would add to the list applying for credit. To me it’s a bit counterintuitive that by applying for credit you actually hurt your ability to get credit. In other words, it’s so much easier to get credit you won’t you don’t need it.

The below is general information only. The information is not legal advice, and should not be treated as such and is subject to the legal disclaimer.

In some situations, you can contract away or limit someone’s right to pull your credit report.For example, in Scott v. Real Estate Fin. Grp., 183 F.3d 97, 100 (2d Cir. 1999) potential renters of a house  conditioned “their offer to rent on the owner’s willingness to forego a credit check.” Id. at 100. The Scott Court held that “parties are free to contractually define whether or not a ‘legitimate business need’ exists ‘in connection with a business transaction.’” Id. Similarly in Uhlig v. Berge Ford, Inc., 257 F.Supp.2d 1228 (D.Ariz.2003), plaintiff purchased a vehicle from defendant with both a trade in and a personal check. During the sales transaction, defendant conducted a credit check despite plaintiff’s demand otherwise and she sought legal redress. In reliance on the Scott case, the district court explained that if parties can contractually agree to what a “legitimate business need” is, it could perceive no reason why they could not contractually agree as to whether any other purpose stated in section 1681b (a)(3) is permissible. Id. at 1233. But see Landeis v. Future Ford, 2:04-CV-2733-MCE-PAN, 2006 WL 1652659 (E.D. Cal. June 14, 2006) (expressly rejecting Uhlig).

 In Young v. Harbor Mortor Works, Inc., 2:07CV0031JVB, 2009 WL 187793 (N.D. Ind. Jan. 27, 2009) a prospect car buyer specifically only allowed the car dealer to submit his credit application to Honda Financial and to no other lenders. The Young Court held that this stated a claim for violation of the FCRA.

So you may be able prevent someone from obtaining your credit report, who would have otherwise have a permissible purpose for obtaining your credit report. You also may be able to limit who can see your credit report. But it’s no sure thing. And you have to be proactive about preventing or limiting those who can access your credit report.

The below is general information only. The information is not legal advice, and should not be treated as such and is subject to the legal disclaimer.

According to a Consumer Report investigation, car dealers do not have to your social security number in order to pull your credit report. Rather, they can use your driver’s license to obtain a copy of your credit report.  And if you’ve ever been shopping for a car at dealership, you know that dealers will get a copy of your license before letting you take a car for a test drive. The dealer may use the information on your license to pull a copy of your credit report. And the dealer might not ask for your permission to do so. This raises an interesting question of whether this violates the Fair Credit Reporting Act.

Based on FTC opinion letter, this may well come to down to question of fact. According the FTC, “an automobile dealer may obtain a report only in those circumstances in which the consumer clearly understands that he or she is initiating the purchase or lease of a vehicle and the seller has a legitimate business need for the consumer report information in order to complete the transaction.”  This opinion is based on the assumption that the car dealer is using 15 U.S.C. 1681b(3)(F)(1)[1] as its permissible purpose for pulling your credit report.

So if you don’t want a car dealer pulling your credit report when you take a test drive, you may want to expressly tell the dealer not to pull your report, just to protect yourself.

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[1] “[A]ny consumer reporting agency may furnish a consumer report under the following circumstances and no other . . . [t]o a person which it has reason to believe . . . otherwise has a legitimate business need for the information–(i) in connection with a business transaction that is initiated by the consumer.”