Why You Should Regularly Check Your Credit Report

We use credit for almost everything these day – when renting an apartment, financing a large-scale purchase like a car, or simply buying groceries at the supermarket. But you may not be aware of the fact that all of your credit transactions are recorded and compiled – and that landlords and employers frequently check an applicant’s credit history to determine if they’re worth the risk as a good candidate for becoming a tenant or an employee.

A credit report is a thorough compilation of your financial history, detailing your various obligations and any activities that take place around those obligations. When you incur a debt of any size (e.g. car loan, personal loan, credit card, mortgage, or bank line of credit), your credit report tracks a great deal of relevant information, including but not limited to, the date you began that obligation, the course of your payment history and when the creditor deems your obligation fully satisfied. 

This information is received and maintained by three independent credit bureaus – Equifax, Experian, and TransUnion. Where does the information come from? In most cases, it’s provided by the creditors, as required by the Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.).

Problems To Watch Out For 

But the process isn’t foolproof.  Problems with an individual’s credit report occur all the time. And you should never rely on either the creditor or the credit bureau to correct those errors – or even notify you that an error took place. 

Problem #1: Inaccuracy. Mistakes happen more often than people think. I’ve talked before about how a creditor accidentally sent a delinquent report to a credit bureau on an account that a client had no recollection of opening in the first place.  It turned out that the creditor superimposed two of the numbers in the account holder’s social security number, causing the delinquent account to be reported against my client’s credit. My client noticed this error when she went to buy a car and the finance officer could not offer her a reasonable interest rate due to the delinquent account (which apparently had been negatively reported on my client’s credit for well over a year). While my client was able to contact the creditor and promptly have the problem corrected, she lost her opportunity to buy the car she wanted and had to go back to looking for another car.

Problem #2: Creditor errors. A creditor may report that you failed to make a payment on your loan, when in fact you did. Or, a creditor may report a loan obligation as still outstanding, when in fact you’ve paid in full.

Problem #3: No reports at all. You may be making payments on a loan or other debt obligation, but the creditor simply isn’t reporting this activity to the credit bureau as they’re supposed to, therefore depriving you of positive credit.

Problem #4: Identity theft. If someone’s stolen your identity, he or she can open a credit account using your name and Social Security number and begin making purchases you know nothing about. All of this perpetrator’s illegal activity will go onto your credit report (negative reporting as you can only presume that the individual won’t be paying the bills as they come in). And, since that individual may not bother to include information about your mailing address, there’s a good chance you won’t receive bills and other notices, leaving you completely unaware of your mounting obligations.

The critical thing to remember is, credit bureaus are not required to verify the information they receive and creditors’ reporting processes, especially with larger companies, are usually computer-generated without regular review mechanisms. It’s entirely up to you to bring a problem to their attention.  And, as you can see from my client’s example above, failure to identify the problem in a timely manner may deprive you of meaningful opportunities (car, house, employment, etc.).

Start by periodically reviewing your credit report. Here are actions you can take:

  • Contact a bureau directly through its website and order a report. You are entitled to one free copy of your credit report every 12 months from each of the free nationwide credit reporting companies (Equifax, TransUnion, and Experian).
  • Look into other entities which offer regular or periodic opportunities to review your report. For example, some credit card companies offer to provide a credit report to you as a benefit for signing up for their card.
  • Visit www.annualcreditreport.com, a free service offered by the federal government, and request a copy of your credit report.

After reviewing your credit report, you should promptly report anything you believe is in error. Unless you say something, neither the creditor nor the credit bureau will take any action. Many of these disputes can be done through the credit bureau’s dispute resolution service. It’s also a good idea to follow up with creditors themselves.  Most importantly, be very specific about any errors you find and be sure to keep copies of any correspondence or documentation sent to or received from the creditor.  

Regular monitoring of your credit, prompt action to resolve any discrepancies, and perseverance in dispute resolution will go a long way in ensuring that your credit is there for you when opportunity knocks. 
Are you in need of legal counseling for debt issues or have any questions regarding the above? The Law Offices of Ian S. Topf offer free consultation in a variety of issues, ranging from bankruptcy, family law and estate planning to traffic violations and landlord/tenant disputes. 

You Have Rights When It Comes to Your Security Deposit

As every renter knows, a security deposit is the amount of money a landlord usually requires at the beginning of a lease, in order to protect him or her in the event that a tenant breaks the terms of a lease agreement. Depending on the terms of the lease, the security deposit is usually held for any kind of damage to the property. 

Here are questions clients often ask regarding their security deposits.

Can the amount of the security deposit be anything the landlord asks for? 

No. In California, there are limits to the amount of the security deposit required with regards to a residential lease (commercial properties have completely different rules). 

How long can a landlord hold onto the security deposit before either using it for repairs or returning it to the tenant?

According to California Civil Code 1950.5, a landlord has 21 days to either return a security deposit in full or to provide a written explanation (delivered in person or by mail), explaining the reasons for any deduction from the deposit. This explanation must include an itemized list of each deduction (and documentation to back them up) and the landlord must return the balance of the deposit that wasn’t deducted. 

One exception: if work is done on the residence but a receipt for those services hasn’t been received in the allotted time-frame, the landlord is obliged to send a good faith estimate of the repairs and then send the actual receipt to the tenant promptly after it’s been received. 

The documentation I referred to must include copies of receipts for any third-party work and any supplies or materials used. If the landlord does the work himself, he is entitled to enter a “fair market” labor rate for his hours spent. 

What things don’t get charged as part of the security deposit?

  • Ordinary wear and tear. Say a tenant has occupied an apartment for a year or so and it was clear that a new coat of paint should have been applied when the tenant first moved in, but nothing was done. In this case, when the tenant moves out, the landlord can’t charge for the cost of new painting. She can only charge for cleaning the unit, in order to make the residence as nice as it was when the tenant first arrived. Upgrades like new carpeting or a new paint job must come out of the landlord’s pocket.
  • Unpaid rent. Unless stated specifically in the lease agreement, a landlord can’t deduct unpaid rent from the security deposit.

Note: A landlord can deduct rent monies from the security deposit if the tenant fails to give proper notice of intent to move out.

What can tenants do if they feel a security deposit agreement has been broken?

If a landlord doesn’t comply with Civil Code 1950.5 or just plain overcharges on various deductions, a tenant can sue for damages in court. “Damages” in these cases generally means the amount of the deposit withheld, plus up to twice that amount in additional damages.

What should a tenant do to prevent this from happening?

Prepare yourself for a possible dispute from day one. Before taking up residence, conduct a thorough “move-in inspection” with the landlord. Note anything that needs repair. Take photographs of any questionable conditions or visibly damaged areas. Keep a copy of this move-in inspection. 

Throughout the time you lease the residence, always document anything that happens that might affect the condition of the rental unit. For example, a hole appears in a wall and you fix it. Provide a notice to the landlord and take photos of the wall after repairs are completed. 

When the time comes to leave, give proper notice in writing. Also ask for and schedule a “move-out inspection,” again documenting conditions of the premises, and get a copy of the inspection report. Also be sure to give the landlord a forwarding address.

Most importantly, if you believe your landlord is in violation of the return of your security deposit, promptly submit a written demand for whatever sums you believe are due and contact a lawyer. Any delay in responding to this situation can severely impact your right to collect whatever sums are owed you.

Are you in a situation affecting your rights as a tenant? The Law Offices of Ian S. Topf offer free consultation in a variety of issues, ranging from family law, estate planning, bankruptcy, and DUIs and landlord/tenant disputes.  

Warning: Getting Emotional Can Cost You Money

As a family law attorney, I often help people when they’re really not at their best. Especially in cases of divorce and child custody, clients are very upset, stressed about the future and unable to think clearly about their options. They frequently take actions based on their emotions that end up prolonging their case and costing them more money. They sweat the little stuff rather than look at the big picture.

Here’s an example: Years ago I represented a woman in a divorce case. She and her husband had been married 22 years and there were serious issues at stake about child custody and support. Instead of focusing on these issues, she and her husband (represented by another attorney) got caught up in personal property disputes. They were fighting over the furniture in the house and even arguing over who should get the treadmill!

There was only one way to settle this dispute without getting a full appraisal of the property. The husband’s attorney and I met at the residence, each of us armed with a yellow notepad. We held an “auction” between the two parties, asking each to bid on each item in the house. When one side or the other bid more on an item, it was placed in his or her column. When it was all added up, the husband’s expenses were more than the wife’s, so he owed her half the difference. More importantly, the process took almost eight hours, which at the attorneys’ rates, cost the two parties an additional $5,000.

A business transaction

Why do people get stuck on the small stuff? Whenever you’re involved in litigation, there’s an emotional component. If one person thinks another is trying to take advantage of them, they will often respond not with reason but out of spite. As noted, this kind of back-and-forth dispute only adds hours to attorney fees, costing both parties money. 

The lesson to clients: With the exception of child custody and support (child and spousal) issues, look at everything else in the proceedings as a business transaction, pure and simple. Leave your emotions out of it. If you’re caught up in a bitter divorce case, I know this is hard to hear but it’s definitely in your best interest.

Focus on the real concerns

Here’s another example: A client learns his wife is having an affair with a mutual friend of theirs. He comes to see me in a highly emotional state, demanding a divorce on the grounds of marital infidelity. After hearing him out, I offer a brief expression of sympathy and then turn our attention to the matter at hand. Since California is a “no-fault” state, he doesn’t need to establish his wife is at fault. He can get divorced for any reason. 

By taking the emotional component out of the situation, we’re able to focus on his real concerns. What will be the terms of his parenting plan (child custody)?  How much will he have to pay in child support? What about spousal support? Has he considered counseling rather than getting a divorce? I divert the emotions and focus instead on helping him move forward in his life.

The more the client stays stuck in emotion, the more expensive his case will be. It’s as simple as that.

Are you in need of legal counseling? The Law Offices of Ian S. Topf offer free consultation in a variety of issues, ranging from bankruptcy, family law and estate planning to traffic violations and landlord/tenant disputes.  

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When Should a Bankruptcy Attorney Get Involved?

As in other areas of law where the courts are involved, in cases of bankruptcy, an attorney is not absolutely required. People often represent themselves in court. Many of the cases I take on are with men and women who have gone that route and been told by either the presiding judge or a trustee monitoring the case that the situation is a mess. It’s always a good idea to consult an attorney before heading into court on your own.

How much debt do you have to accumulate before considering bankruptcy? People come to my office saying they’re $15,000, $20,000, or $25,000 in debt. They want to know if they’ve hit the “magic minimum amount” needed. There is no such magic number. A person earning minimum wage who is $9,000 in debt may need bankruptcy relief as much as someone owing three times that amount. That’s because it’s easy for a “manageable” debt to double or triple in a short period of time. 

As I tell my clients, debt is quicksand. As time passes, with finance charges and interest, you can get deeper and deeper in debt. 

The right time to consult a bankruptcy attorney is the moment you feel overwhelmed by debt. Even if filing for Chapter 7 or Chapter 13 bankruptcy turns out not to be the right option, an attorney can advise you on what you should be doing to manage your debt. It may cost some money up-front for a lawyer to develop an effective debt-reduction plan—but you will likely save money, and your good credit, in the long run. 

There are some serious drawbacks to declaring bankruptcy. For one thing, it remains part of your credit history for at least seven years. Looking to rent an apartment? Landlords often use bankruptcy as a reason to deny a rental or to require a larger security deposit. Want to open a bank account? After filing for bankruptcy, you’re considered a severe risk by Chex Systems (used by banks and credit unions to assist these institutions in risk assessments). This makes even a simple thing like having a checking account very difficult.  

What are the upsides to filing? First of all, this is an opportunity to discharge many of your debts and get a fresh start on your finances. There’s also the enormous relief of getting that debt off your shoulders and hopefully easing some of the strain you’re experiencing with your loved ones.

Like me, most bankruptcy attorneys are first and foremost debt-relief attorneys. Our job is to analyze a client’s financial situation and advise them on their various options, such as debt negotiation, debt consolidation or other avenues of debt relief. Ultimately, the client makes the final choice. 

So, yes—in many cases bankruptcy is worth considering as an answer to your debt problems. Whatever happens, don’t make the mistake of applying for credit cards without reading the fine print. You may find yourself locked into an interest rate of 19% or higher—for most people, that’s the worst possible situation to be in.

Are you in need of legal counseling? The Law Offices of Ian S. Topf offer free consultation in a variety of issues, ranging from bankruptcy, family law and estate planning to traffic violations and landlord/tenant disputes.