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Credit Education > Credit Score > The Implications of the ECOA Codes

The Implications of the ECOA Codes

By Janet Lacey
Published: Thursday, February 18th, 2010

The Equal Credit Opportunity Act or most commonly called as the ECOA was formulated to give account holders a leveled field in getting high credit worthiness ratings. This law was passed as a counter measure to the possible biases and inclinations that lenders may have to certain group of people. This law is responsible for the incentive points in the credit scores of individuals at certain age brackets. This law attempts to make every part of the credit worthiness evaluation system more fair and leveled to those who wish to participate.

In line with the aims of this law, ECOA started the segregation of accounts based on the statuses of account holders. This move of the law enables the different demographic groups of account holders more recognized as compared to others, based on their efforts in keeping themselves credit worthy. Some of these groupings are individual, joint, co-signer that is secondary liable, co- signer that is primary liable, authorized user and undesignated. These groupings are generally called as ECOA codes.

Individual ECOA code refers that an individual is solely liable for his or her credit worthiness ratings. The credit report and score of a account holder grouped under the individual code implies that the account holder is fully legally responsible. Alterations and need for disputes can only be done by the individual himself or herself.

A joint ECOA code refers to an account with two parties that consented in merging their accounts. This type of code will hold both parties in the joint account equally liable in the possible dilemmas of their joint account. This type of account is usually entered by couples. A joint account even if it has two parties will be treated as one in their credit score computation and credit report writing.

Co- signer accounts have two major types which are primary liable accounts and secondary liable accounts. A co- signer with primary liability means that the individual who took the financial agreement account for himself or herself needs someone to sign as guarantor. The guarantor is sometimes required by creditors and lenders as an assurance that the debt will be paid. Any negative deviation of the primary liable individual in terms of payments will have the same effect on the credit report and score of the other co-signed party. On the other hand a secondary liable co- signer means that he or she is the individual needed by the primary liable account holder to be able to avail his or her desired financial agreement.

Authorized user ECOA code means that the existing account has not been signed by the actual individual whose name can be used in the application of the account. He or she simply authorized the use of his or her name. The individual who authorized the financial agreement is not legally liable which means that this code does not affect the credit report of the individual because it is not accounted as part of the individual’s credit history. Lastly, an undesignated status on the ECOA code of an individual literally means that the current status of the individual is unqualified or not yet qualified for the other ECOA codes.

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