As we try to establish credit through borrowing money, it is important to have protections in place. Laws like the Fair Credit Reporting Act ensure that our credit files have accurate and up-to-date information. However, there are also laws that govern what sorts of people are eligible to receive credit. The Equal Credit Opportunity Act (ECOA) provides protections for different people as they seek credit. The ECOA states that you cannot be discriminated against due to:

• Age.
• Gender.
• Sexual orientation.
• Religion.
• Marital status.
• Race.
• Ethnicity.

These are all questions that creditors can ask, but they are not allowed to deny you credit based on your answers. This sort of demographic information is supposed to be used only for that – establishing the demographics of a credit issuer's customers.

Protections under the Equal Credit Opportunity Act

The Equal Credit Opportunity Act ensures that if you have a high enough income, an established credit history, a good credit rating and a low debt-to-income ratio, you have to be issued credit, regardless of the physical characteristics that you have. This offers an important protection, since it ensures that you can get the credit you need, as long as you are reasonably qualified from a financial standpoint.

Other protections under the ECOA include:

Public assistance. If you are receiving reliable public assistance, creditors must treat it as income. If you list it as part of your income, creditors have to treat it as such. This is because reliable public assistance is, in fact, a form of income; just because it comes from the government is not a legal reason to reject a credit application.

Right to know the reason for denial. In addition to the rights listed above, a credit applicant also has the right to know why his or her application was rejected. When a credit issuer sends a letter of denial, the company has to list the reason. Acceptable reasons for rejection a credit application include:

• Not a high enough income.
• Insufficient credit history.
• High debt-to-income ratio.
• Too many other applications for credit.
• Low credit score.

These are reasons of legitimate concern to credit issuers, and your credit application can be legally rejected in such cases. But the issuer has to offer one or more of these reasons, along with the name of the credit bureau that provided the information that led to your credit application rejection.

When you apply for credit, there are certain protections that you can expect. It is important to know your rights as a consumer and a credit user. You can learn more about your rights with regard to credit by visiting the Federal Trade Commission Web site: www.ftc.gov.