Federal Trade Commission
January 1993
Credit and Older Americans
fast facts
- Under the federal Equal Opportunity Act (ECOA),
it is against the law for a creditor to deny you
credit or terminate existing credit simply
because of your age.
- When you apply for credit, creditors who consider
income must consider not only salary from a job,
but also income from Social Security, pensions,
and other retirement benefits.
- Under the ECOA, a creditor cannot automatically
close or change the terms of a joint
account solely because of the death of your
spouse.
- If you are concerned about your credit status if
your spouse should die, you may want to open an
account in your own name.
|
Bureau of Consumer Protection Office
of Consumer & Business Education
(202) 326-3650 |
Prepared in cooperation with the American
Association of Retired Persons
Securing credit is as important for
older Americans as it is for younger. Yet, older consumers and
particularly older women may find they have special problems with
credit.
For example, if you have paid with cash all your life, you may
find it difficult to open a credit account, because you have
"no credit history" (i.e., no history of how you paid
for credit). If you now are living on a lower salary or pension,
you may find it harder to obtain a loan because you have
"insufficient income." Or, if your spouse dies, you may
find that creditors try to close accounts that you and your
spouse once shared.
Under the federal Equal Credit Opportunity Act (ECOA), it is
against the law for a creditor to deny you credit or terminate
existing credit simply because of your age. This brochure will
help you learn what rights you have.
Applying for Credit
Applying for credit used to mean asking a neighborhood banker
or tradesperson for a loan. Now, with national credit cards and
computerized applications, the day of personal evaluations may be
over. Instead, computer evaluations look at, among other things,
your income, your past payment records, your credit cards, and
your outstanding balances. Paying in cash and in full may be
sound financial advice, but they will not give you a history on
which to get credit.
When you apply for credit or a loan, one major indicator of your
ability to repay is your current income. If you are retired or
employed part-time, this may be of some concern. But creditors
who consider income must consider types of income that are likely
to be received by older Americans. These include not only salary
from a job, but also from Social Security, pensions, and other
retirement benefits.
In addition, you may want to inform creditors about other assets
or sources of income, such as your home, other real estate,
savings and checking accounts, money market funds, certificates
of deposit, and stocks and bonds.
If you are 62 or over, you have certain other protections when
you apply for credit. You cannot be denied credit because of your
age or the fact that you cannot obtain credit-related insurance
because of your age. Credit-related insurance pays off the
creditor if you should die or become disabled.
However, a creditor can consider your age to:
* favor applicants who are 62 or over.
* determine other elements of creditworthiness. (For example, a
creditor could use your age to see if your income might change
because you are at the age of retirement.)
Checking Your Credit History
When you apply for credit, a creditor will often check your
credit history by contacting a credit bureau. If you want to know
what is in your credit file, contact the local credit bureaus
that have your file. (Credit bureaus can be found in the Yellow
Pages under headings such as "Credit" or "Credit
Rating and Reporting Agencies.") They will tell you what
information is in your file and may give you a copy of your
credit report. Credit bureaus may charge a small fee for this
(unless you have been denied credit based on your credit report).
You may find that your credit file does not list all of your
credit accounts. This is because not all creditors report to
credit bureaus. You can request, however, that additional
accounts be reported to your file. Credit bureaus, though, may
charge for this service.
If you move, request that the credit bureau in your new location
transfer your credit file from your previous location. Most
credit bureaus are willing to share this information.
Credit information about shared accounts should be reported in
your name and in your spouse's. If it is not, you can write to
the creditor and request that the account be reported in both
names.
Establishing a Credit History
If you are denied a loan or credit card because you have no
credit history, you may want to establish one. The best way to do
this is to borrow money or use a credit card and make payments
regularly. For example, you could apply for a small line of
credit from your bank or for a credit card from a local
department store. Local creditors that you know usually are more
inclined to give you credit.
Of course, you will want to give these creditors your best
financial references. And, make sure the creditor you open an
account with reports your credit history to a credit bureau; not
all do.
If a Spouse Should Die
Under the ECOA, a creditor cannot automatically close or
change the terms of a joint account solely because of the death
of your spouse. (A "joint account" is one for which
both spouses applied and signed the credit agreement.) In some
instances though, a creditor may ask you to update your
application or reapply. This can happen if the initial acceptance
was based on all or part of your spouse's income and if the
creditor has reason to suspect your income is inadequate to
support the credit line.
After you submit a re-application, the creditor will determine
whether to continue to extend you credit or change your credit
limits. While your application is being reviewed, the creditor
must let you use the account without new restrictions. Within 30
days of receiving a completed application, the creditor must give
you a written response on your application. If your application
is turned down, you must be given specific reasons for denial.
All these protections regarding closing or changing the terms of
an account also apply when you retire, reach a certain age, or
change your name or marital status.
Kinds of Accounts
To ensure that you are protected if a spouse should die, it is
important to know what kind of credit accounts you have. For
example, there are three basic kinds of credit accounts. They
are:
* An individual account, where the charge is opened in one
person's name and is based only on that person's income and
assets.
* A joint account, where the charge is opened in two people's
names, often a husband and wife, and is based on the income and
assets from both or either person, and where both people are
contractually liable for any debts because they signed the credit
application.
* A user account, where two people's name may appear on a charge
card, but the account is based on the income and assets of just
one of those people, who also is the only one legally responsible
for any debts.
If you and your spouse share a credit account, only a joint
account gives you the protections against closing the account
should your spouse die; a user account does not. If you combine
your own and your spouse's financial resources to apply for a
credit account, make sure you are opening a joint account and not
a user account, where your name simply appears on the credit
card.
To find out what kind of account you have, check the application
to see if you applied for credit as "joint applicants"
or ask your creditor. That way, your credit status would be
protected in the event of your spouse's death.
If you are concerned about your credit status if your spouse
should die, you may want to try -- if you have enough income and
assets on your own -- to open one or more individual accounts in
your own name. In that way, your credit status would remain
unaffected in the event of your spouse's death.
When you are applying for individual credit, you should ask the
creditor to consider the credit history of accounts that are
reported in your spouse's or former spouse's name only, as well
as those that are in your name. The creditor must consider this
information if you can show that it reflects on your ability to
manage credit. For example, you may be able to show through
cancelled checks that you made payments on an account, even
though it is listed in your spouse's name only.
If You Are Denied Credit
While the ECOA gives you certain rights, it does not guarantee
that you will be granted credit. Creditors are the ones who make
that decision. But if you are ever denied credit, first make sure
you request the reasons for the denial. It may have been an error
or the computer system may not have evaluated all relevant
information. In that case, you can ask the creditor to
reconsider.
You might be able to negotiate a compromise with the creditor.
If, for example, at the age of 70, you apply for a 30-year
mortgage, a lender might be concerned about your ability to repay
the loan. However, if you applied for a 15-year mortgage,
increased your downpayment, or did both, you might satisfy the
creditor's concerns.
If you believe you have been discriminated against, however, you
may want to write to the federal agency that regulates that
particular creditor. You should be able to find the name and
address of this federal agency in the letter turning down your
request for credit.
If you do write, try to include all the facts -- including any
oral statements or discussions. Keep copies of all documents and
submit this information along with a letter of explanation to the
appropriate federal agency or, if you wish, to an attorney. You
have the right to sue a creditor who violates the ECOA.
For More Information
If you have questions about the Equal Credit Opportunity Act
or your credit rights, write to: Correspondence Branch, Federal
Trade Commission, Washington, D.C. 20580. Although the FTC
generally does not intervene in individual disputes, the
information you provide may indicate a pattern of practices
requiring action by the Commission.
In addition, the FTC provides other credit publications: Equal
Credit Opportunity; Fair Credit Reporting; and Women and Credit
Histories. For a single free copy, write to: Public
Reference, Federal Trade Commission, Washington, D.C. 20580. 6/87