Credit report

The Fair Credit Reporting Act: what you need to know

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The Fair Credit Reporting Act protects your interests by governing how credit reporting agencies collect, protect, and share your information. The FCRA includes provisions on who can request your credit report and how you can access it.

The legislation was created in 1970 to promote fairness, confidentiality and the accuracy of the way credit was reported. Over the decades, it has been modified and extended to provide more comprehensive protections for credit reports, especially as identity theft issues have increased. Since it covers many financial tools and services – from loans to credit cards and mortgages – it’s helpful to understand how this law works.

“Two protections most useful to consumers are the provisions to ensure that consumer information included in a credit report is accurate and a set of provisions that explain how a consumer can protect himself in the event of identity theft”, explains Adam Ragan, partner of the Fox Rothschild law firm.

How the Fair Credit Reporting Act works

Credit bureaus compile reports containing sensitive information about the financial history of consumers. These details may include the extent to which your credit card what payments are and what types of loans you have outstanding. This information is useful for proving your creditworthiness in various contexts, but at the same time, you don’t want it to be accessible to just anyone.

FCRA benefits lenders, consumers, and credit bureaus by holding these organizations accountable for the accuracy and completeness of reporting.

“The Fair Credit Reporting Act is an increasingly relevant and useful tool from a consumer perspective,” says Ragan. “Consumers often learn about FCRA due to data breaches and alerts, as well as the credit protections they have been enrolled in. But many consumers still struggle to understand the ins and outs of the process. ”

What Do Credit Reporting Agencies Do?

The three most famous credit reporting agencies are Experian, TransUnion, and Equifax, although there are other credit reporting related companies that are smaller and specialize in areas such as rental history records. These agencies collect information and compile a history of your credit usage on your credit report. Everything from on-time mortgage payments to credit card balance transfers could affect your credit report.

This report helps future lenders assess the level of risk they are taking in extending additional credit to you. Others, such as landlords and employers, can use this report to understand your history of reliability and economic risk as they build relationships of trust by extending a rental lease or job offer to you.

The Federal Trade Commission and the Consumer Financial Protection Bureau work together to enforce the various components of the FCRA, which limit what information can be shared with credit bureaus and what they can share with anyone who requests your. credit report. It also gives you access to your credit information and helps you dispute errors that are hurting your credit.

How the FCRA protects you

Although the full text of the FCRA is available online, it is long (and dense). However, the main layouts you need to know are pretty straightforward. They are that:

1. You are entitled to a free credit report every year

One of the great things about FCRA is that each of the three credit bureaus will provide you with a free credit report every year. The best way to access this service is to use annualcreditreport.com. And, right now, thanks to improvements related to COVID, this site is offering free weekly access to your credit report. Some sites offer free credit reports just to request payment later. Don’t pay for a service you can receive for free.

This access is tied to your broader right to know what is on your credit report. The FCRA protects these rights, making accessing your own credit history easier and more transparent.

If you want more than one credit report per year, the FCRA sets a limit of up to $ 13 per additional report, so keep that in mind.

2. You can dispute the errors on your credit report

If your the credit rating is low due to an error on your report, you are not required to accept this score. You can provide evidence to disprove the mistake – for example, showing that you have made all payments on a loan or that you have never missed a payment on a credit card. As you can imagine, keeping all documents associated with loans and credit cards in a safe place is an important step to take so that you can clear up any errors on your credit report in the future.

Credit bureaus are required to assess the evidence you provide in a dispute and contact related entities such as lenders who provided this information. The FCRA also states that they must restore your credit report if they find an inaccuracy due to the dispute. Most reports don’t contain errors, but they do occur often enough that it’s worth checking out if you’re surprised with a low score.

Sometimes the information is not inaccurate, but outdated. The FCRA sets rules about how long a credit reporting agency can include past negative information in your reports. In many cases, negative information can no longer be reported after seven years, or in bankruptcy, 10 years. If you find accurate information on your report that is out of date, you can submit a dispute.

3. Employers need your written consent to extract your credit information

Credit bureaus, in most cases, must seek your permission in the form of written consent before give credit information to an employer or potential employer. This can give you a bit more control over the information shared during a job search.

4. If your credit application is refused, you have the right to know why

Most people don’t think much about their credit rating or report back until they are turned down for a loan or applied for a credit card. If you are surprised by a denied credit application, you have the legal right to hear why they have denied your application. It’s actually a way for people to find errors on their credit reports, so make sure you understand the reasons why you were denied credit. While this is not a mistake, this information can still help you make good decisions to increase your credit score in the future.

5. You have the right to freeze your credit and seek redress in the event of identity theft

Identity theft has become easier with the prevalence of the Internet. High-profile data breaches, such as Equifax data breach in 2017, underline the need for continued vigilance and protection for consumers. A person’s credit can be ruined by someone attempting to fraudulently acquire loans or credit cards on behalf of the person.

“In 2018, a new provision put in place a policy to provide free safety gels,” Ragan said. “A credit freeze is useful because it will prevent most businesses from accessing your credit report until you request that the freeze be lifted.”

While security freezes can be removed by credit bureaus in isolated cases and all current creditors can still have access to your credit information, this protection makes it easier to take immediate action if you realize that your information is part of a data breach.

In addition, the FCRA has special provisions for victims of identity theft, many of which you can access after you initially get an impersonation report.

“A great resource for consumers is the FTC’s Identitytheft.gov website,” says Ragan. “There is a step-by-step process by which a consumer can generate a report. This PDF can help borrowers get some of the FCRA’s specialized relief. ”

FCRA FAQ

Does the FCRA regulate banks and credit card issuers?

The FCRA regulates the information that credit bureaus can collect and share, as well as the types of information that banks and credit card issuers can share with those bureaus.

How can I get a free copy of my credit report?

Normally, you can request a free copy of your credit report once every 12 months through the annualcreditreport.com website, the only authorized source for these reports. Right now, however, you can request a free copy every week, thanks to the benefits of COVID.

How do I dispute an error on my credit report?

You can file a dispute online, by phone or by mail. The Consumer Finance Protection Bureau offers step-by-step instructions on how to write your letter, including a sample letter, and offers information for contacting Equifax, Experian, and TransUnion separately, as some errors may occur on only one or two of your letters. credit reports.

Each credit reporting agency has similar information on their websites. Beware of organizations that claim to “fix your credit” but want to charge a fee, as disputing an error on your credit report should be a free process provided directly by the credit reporting agency.

Read more: How to dispute an error on your credit report