If you’ve ever applied for a loan or credit card, then you must be knowing that your credit score is one of the significant factors that determine whether you’ll get a loan or credit card.
For the uninitiated, a credit score is well, a “score”, indicating how likely you are to pay back a loan after borrowing it. The credit score range is between 300-850, and every person who has lent a loan previously will have a score. The score is calculated by scrutinizing your lending and repaying habits. Thus, the rating improves if you make timely repayments and will worsen if you don’t.
There are five different grades of credit scores, as described below:
- 300 – 499: Very Poor.
- 500-600: Poor.
- 601-660: Fair.
- 661-780: Good.
- 781-850: Excellent.
The score ranges may differ slightly depending on the agency setting them, and anything between 300 to 600 is considered as a “bad credit score”. Apart from not repaying debts on time, anyone who hasn’t borrowed from a registered lender in the past will also have a bad credit score.
How to Get Loans for Bad Credit?
You might already know that getting a loan for bad credit is difficult, but it isn’t impossible. Several lenders provide loans to people with a bad credit score like the payday loans in Texas at Personal Money Network, secured bad credit loans, etc.
As people with a bad credit score have fewer options to lend money, they are often harassed by the lenders. There are several credit laws that aim to prevent the exploitation of borrowers with a bad credit score. In this article, we list out some rules that might help people with a bad credit score to safeguard their interests while borrowing loans.
5 Credit Laws That Can Help People with Bad Credit
1. Credit Repair Organization Act (CROA)
When you have a damaged credit score due to faulted repayments, the very next thing to do is to repair it. The Credit Repair Organization Act allows individuals or businesses to provide credit repair services and accept a fee for the same. However, as per the CROA act, those who offer such services should be completely transparent with their clients about what they do and cannot charge any fee before providing the services.
The CROA act also prohibits submitting altered information to creditors about the credit history of a customer to get a better credit score or setting up a new identity for a customer to establish a new credit history.
2. Equal Credit Opportunity Act (ECOA)
The ECOA act criminalizes denying financial services to any person or organization on factors that aren’t based on their credit history. This means that anyone who discriminates the services they offer based on religion, race, sex, nationality, etc. can be sued for malpractice.
Even though acting based on non-financial factors is a crime as per the ECOA act, lenders can still request for such information to build a personal profile of yours.
3. Fair Debt Collection Practices Act (FDCPA)
FDCPA is an act that establishes specific rules and regulations regarding how debtors can recollect their loans from borrowers, such as:
- Using profane language.
- Making phone calls before 8 AM or after 9 PM.
- Establishing too many collection calls.
- Threatening to notify the friends/family of the borrower about not paying the debts.
- Attempting to collect more than the amount owed.
- Sending a false/misleading document to the borrower forcing them to repay.
4. Fair Credit Reporting Act (FCRA)
The FCRA act ensures that only accurate information is included with a credit report and that it stays confidential. Moreover, this act gives every person access to one free copy of their credit report per year, after which you will have to pay a fee for the same.
With the help of the FCRA act, people can dispute any error-filled data included in their credit report, and in case the dispute is ruled in your favor, the credit reporting agency should rectify or altogether remove the erroneous data from your report.
5. Truth In Lending Act (TILA)
Anyone trying to refinance a pre-existing loan or get approval for a new loan is entitled to the “Truth-in-Lending” statement. This statement will provide you with all the essential information related to your loan, including its annual interest rate, extra charges, penalties, duration of the loan, monthly repayment amount, date of repayment, etc.
As per TILA, all the information related to the loan must be understood and approved by the borrower. Moreover, the same details must also be present within the billing statements.
This article featured some fundamental laws that people with a bad credit score should be aware of, before availing any loans. We hope that you found this article informative. In case of any questions, feel free to ask us by mentioning them as comments below.