When you are looking to borrow money, your credit report is the most important document that influences the lender's decision. This credit report contains sensitive personal data about your payment history on many types of loans and lines of credit, plus legal information about bankruptcy, foreclosure, and tax liens. Because of the importance of your credit report, the Fair Credit Reporting Act (FCRA) was created to regulate the collection, dissemination, and use of consumer information, including consumer credit information
History of the Fair Credit Reporting Act
As consumer credit became more common in the 1960s, the United States government wanted to create clear legislation regulating how consumer credit information would be stored and shared. Congress passed the resulting Fair Credit Reporting Act on October 26, 1970. FCRA has gone through a series of amendments and clarifications from the late 1990s through present day. The current piece of legislation is comprehensive and offers a wide range of protections and rights for consumers.
Important Components of the Fair Credit Reporting Act
- View your credit report and score: All consumer reporting agencies, sometimes known as credit bureaus, must provide you with a copy of your credit report if you request it and verify your identity. You are eligible to get one free credit report each year from each of the three major credit bureaus. Use annualcreditreport.com to view this report. You may need to pay for additional reports. Credit bureaus also must disclose your credit score if you ask, but they are allowed to require payment for this.
- You have a right to know when a creditor uses information on your credit report against you. If a lender, credit card company, employer, or insurance company denies your application or takes other negative action against you because of your credit report, they must notify you. The FCRA also states that they must tell you where they obtained that credit report.
- Limit access to your credit report: Only specific companies can gain access to your credit report. Employers must get your written consent before obtaining your credit report. Others must have a valid reason for viewing your credit, such as reviewing your application for a loan or rental.
- Investigate information you believe is inaccurate: Credit bureaus have a responsibility to maintain accurate information in your credit file to the best of their ability. If you believe a piece of information is incorrect, you have the right to dispute it. The FCRA states that the credit bureau must investigate your dispute and verify from the source whether the information is correct.
- Remove outdated information from your credit report: Negative credit history cannot stay with you forever. Credit bureaus must remove negative information after seven years or 10 years in the case of some types of bankruptcy. If you ever find older negative information on your credit report, the credit bureaus must remove it promptly when you point it out.
- Limit whether your name appears on lists provided to insurers and creditors. Many companies request lists of individuals who meet specific credit requirements so they can offer credit cards, insurance, and other consumer financial products. If you request removal of your name from these lists, the credit bureaus must stop sharing your information. You can call 1-888-5-OPT OUT to opt out of receiving prescreened offers.
The Fair Credit Reporting Act is national legislation. Some states have also created legislation to provide further consumer credit rights. Contact your state Attorney General if you would like more information about state laws.