Fair Credit Reporting Act (FCRA)
The Fair Credit Reporting Act (or FCRA) is a federal law passed in 1970 and is one of two laws that are the foundation of consumer rights in the United States. It is enforced by the Federal Trade Commission, Consumer Financial Protection Bureau, and by private lawsuits. It regulates your rights as they regard the credit reports compiled by TransUnion, Experian, and Equifax (the three major credit bureaus), and other nationwide specialty consumer reporting agencies.
What You Need To Know About Its Application
Information about your credit status is continuously being collected by credit bureaus, and the Fair Credit Reporting Act regulates how that information is collected, who can access your credit file, how that data is shared, and how long it can be retained on your credit report. FCRA was designed to improve the fairness and accuracy of the reports, and to protect your privacy. In short, it protects you from unfair practice by consumer credit reporting agencies.
The Fair Credit Reporting Act Allows You to Access Your Information
According to the Fair Credit Report Act, you are entitled to know what your credit reports contain. Once a year, you can request access to your credit reports (they call it file disclosure) for free at AnnualCreditReport.com, from TransUnion, Experian, or Equifax (once from each credit bureau). You will be charged a fee for any additional file disclosure within the same year.
You can also request your information from any other specialty consumer reporting agencies, but they have their own policies regarding file disclosure fees. Take note that only the above-mentioned website is government-sanctioned. You will need to provide your personal data and sharing such information to unverified websites can be dangerous.
You are also entitled to know if any of the information contained within your report is used against you. If you are denied employment or insurance, or get your credit application rejected based on the data in your file, you need to be informed.
You Have the Right to Privacy
As your file contains data about your financial status, payment history, etc., and is used to calculate your credit score, it has a significant impact on every aspect of your life. That is why the Fair Credit Reporting Act gives you certain rights to restrict who can view your file. In general, individuals or institutions must have a “permissible purpose” to get your information.
This means that you can either personally authorize a third party to view your information, or you must initiate some kind of transaction. For instance, if you apply for a loan, insurance, or wish to rent an apartment, then your creditors, insurance companies, or landlords have a permissible purpose to view the information. Subpoenas or court orders can also be used to obtain your report.
On the other hand, for employment purposes or if any other third party wants to see your information, you need to give explicit permission. Besides information about your credit, your credit file also contains personal data that can be used to identify you, such as your name, address, social security number, marital and employment status, etc. That is why it is important to restrict access to only those people or institutions you trust.
Freezing Your Credit Reports
Outside of your regular right to privacy, you have additional rights you can employ if you believe yourself to be a victim of identity theft, fraud, or something similar. You can freeze your credit report, which will stop anyone from accessing your information without express permission.
Your credit score won’t be affected, but neither can it be changed until it is unfrozen. Freezing stops unauthorized credit accounts from being opened, but it will also stop typically authorized checks. You will not be able to apply for new loans or credit cards until you unfreeze your account.
You Are Protected From Outdated Information
No credit reporting agency is allowed to report outdated negative information. Most negative items must be deleted from your report after 7 years. Bankruptcies can’t be reported after 10 years. This protects your credit score from being negatively affected after a certain period of time.
You Can Initiate Disputes Under the Fair Credit Reporting Act
Credit reporting agencies are legally obligated to report accurate, verified, and complete information. According to the Fair Credit Reporting Act, you have the right to dispute any entries that you believe are inaccurate, unverified, or incomplete. They must investigate the disputed items and delete or correct them if you are accurate in your estimate.
In case the bureaus or specialty consumer reporting agencies don’t respond in a manner you believe is lawful, you can lodge a complaint with the Federal Consumer Financial Protection Bureau or initiate a private lawsuit.
Contact a Credit Analyst Before You Initiate Any Court Proceedings
It is in your best interest to have a credit analyst investigate your credit reports before you initiate any legal actions. They can explain your rights in more detail and may help you improve your credit score without having to start an expensive legal process.