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.
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