What is The Fair Credit Reporting Act?

You have probably heard references to the Fair Credit Reporting Act, also known as FCRA.  It’s basically the Bible in the credit world and it defines the conditions under how your credit reports are maintained, sold, and corrected.

The FCRA is a Federal law enacted in 1970 and has been updated numerous times since then.  It provides for the accuracy, fairness and privacy of information of files at consumer reporting agencies.  A consumer reporting agency is any person who assembles or evaluates and sells consumer information to third parties through interstate commerce. The consumer information can be credit reports or other information.

There are many consumer reporting agencies that collect data on consumers; the most common are the consumer credit reporting agencies that house your credit report.  There are other consumer credit reporting agencies that sell information on check writing histories, medical records, apartment rental, insurance claims and employment background checks.

Here are some key consumer rights under the FCRA:

• Limits who can request your consumer report – a CRA can provide information to companies or persons with a valid need such as:

Lenders – Qualify you for a loan or credit card.

Present creditors – Review or monitor your credit.

Employers – Conduct a background check which can include a credit report for purpose of employment. You have to give potential or present employers written permission to obtain this information. Insurer – Evaluating whether to renew or issue you a policy.

Landlords – Determine your ability to pay rent.

You – You can request a copy of your consumer report. You are entitled to a free copy of your credit report annually for all three credit bureaus at www.annualcreditreport.com.  You are also entitled to a free consumer report if a person has taken adverse action against you because of information in your consumer report or are the victim of identity theft and place a fraud alert in your file.

• Informs you when information has been used against you – If you have been denied employment, insurance or credit you are to be notified in writing of this and the name, address and phone number of the consumer reporting agency that provided this information.

• Dispute the information – You can dispute inaccurate, incomplete or unverifiable information on your consumer report. You can file a dispute with the CRA and the company that furnished the information. They have 30 days to investigate and either remove, correct or continue to report it, if it is accurate.

• Request your credit score – You can request your credit score from consumer credit reporting agencies consumer reporting agencies that create scores or distribute scores used in residential real property loans but you have to pay for it.

• Limit the age of data reported – In most cases, a consumer reporting agency may not report negative information that is more than seven years old, or bankruptcies that are more than 10 years old.

• Limit prescreen offers – This is also considered “opt-out”. Unsolicited “prescreened” offers for credit and insurance must include a toll-free phone number you can call to remove your name and address from the lists. To “opt-out with the three national credit reporting agencies call 1-888-567-8688.

• Violations – If a consumer reporting agency or a furnisher of information to a consumer reporting agency violates the FCRA, you may be able to sue in state or federal court.

You do have protection under the FCRA which lets you get a free credit report, dispute errors on your credit report, give written permission to employers to conduct a background report, notified of adverse action, opt-out of prescreen offers and purchase your credit score.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Credit Report, Credit Score, Money & Identity

This post was written by John Ulzheimer