Credit Damage Blog

Loss of credit expectancy is one of the four types of credit damage. Like loss of credit capacity, loss of expectancy concerns the ability to obtain and maintain credit after the wrongful act of another damages creditworthiness. Loss of expectancy differs from loss of capacity as it involves predictable and foreseeable future use of credit as distinct from credit capacity which involves the inability to continue to utilize credit as the injured person could before damage to credit.

Creditworthiness is determined by a creditor’s underwriting department which determines the probability that the credit applicant will meet debt obligations in a timely fashion. Someone who is deemed likely to satisfy debt obligations is creditworthy while someone who is more likely to default is a greater credit risk and not creditworthy.

Thus someone who is considered creditworthy prior to injury to credit by the wrongful act of another and not creditworthy after occurrence of the injury has suffered credit damage. Such damage will result in either diminished credit capacity, diminished credit expectancy, or both. Credit capacity concerns the decrease of available credit and the inability to use credit at the same interest rate, thus at a greater cost.

Credit expectancy is concerned with the performance based expectation of obtaining credit to maintain an attained lifestyle or to accomplish the life style to which one aspires. In other words, credit expectancy can be seen as a window of opportunity to advance goals. When credit is injured, that window of opportunity is slammed shut.

Expectancy is typical in human life. A college student expects to obtain future employment when a degree is attained. A medical student expects to become a doctor. Or a law student expects to be a lawyer. Similarly a person with a history of creditworthiness expects to be able to use credit in new and additional ways with increased credit availability and at a lower cost. This is credit expectancy.

When a pattern of credit use is interfered with that person’s expectation of continued credit or greater credit might be damaged. One illustration is the real estate investor who has a history of purchasing six properties per year for improvement and resale at a profit. Credit problems occur and the investor finds it impossible to obtain new credit to finance the purchases of property. The reasonable and foreseeable expectation of obtaining credit to finance a future enterprise has been dashed and the investor has been damaged accordingly. The window of opportunity has been broken. When the loss of credit occurs as the result of the wrongful act of another, credit damage has occurred in the form of loss of credit expectancy.

Other reasonable expectations which a person with a developing history of creditworthiness might envisage is the purchase of a first or new home, a new car, or credit cards with higher limits and lower interest rates. When creditworthiness is diminished and the window of opportunity is closed, those expectancies will be dashed and unattainable. That is the crux of damages for loss of credit expectancy.

It is likely that when credit damage for loss of expectancy is alleged the objection will be made that credit expectancy, something to occur in the future, is speculative. That issue can be met and overcome in the same manner that a similar objection to damages for diminished earning capacity is met with the testimony of the injured party and testimony of a qualified expert. The person whose credit has been damaged can testify about plans to utilize credit. Expert testimony concerning statistical evidence showing how credit is used by people similarly situated to the injured person is admissible.

To successfully recover credit damages for the loss of credit expectancy requires the services of a qualified expert to address the economic loss for damage to expectancy. Georg Finder is such an expert who has qualified as an expert witness in State and Federal courts. To learn about how Georg can assist you, please see http://www.creditdamage.com.