Fair Credit Reporting Act – Explained Simply

Fair Credit Reporting Act – Explained Simply

The Fair Credit Reporting Act (FCRA) is a federal law, passed in 1970, pertaining to standardization of the credit reporting system. The act consists of provisions for the following:
● Protecting the privacy rights of consumers
● Standardizing the way credit information is used and maintained
● Ensuring fairness and accuracy in the credit reporting.

Further, it also establishes Federal Trade Commission (FTC) as the authority for governing credit bureaus and credit companies. The act gives directions to consumer reporting agencies and credit companies when it comes to collecting, distributing, issuing, using and maintaining consumers’ credit records.

Under FCRA, anyone who wants to access your personal information needs a permitted purpose to do so. This puts a limit on all those who can access your file be it lenders, credit agencies, insurance companies or employers. So you need not to worry about one of your co-workers and neighbours, eager to make wrong use of your personal information.

Know Your Rights

Here is a quick list of consumer rights under the Fair Credit Reporting Act.

1. You have the right to get a copy of your credit score. You can request it via phone, internet or mail. Consumer reporting agencies usually send it within 15 days of your request.
2. You should know that employers need to have your permission before they can pull out your credit report, failing which, you become entitled to file a lawsuit against them.
3. You have the right to know what’s in your file. You can request file disclosure once in every year. All you need to provide is your social security number (SSN) to the credit bureau and consumer reporting agencies. The disclosure will be free in any of the following cases:

• A person has taken adverse action against you because of an information in your credit report
• You are the victim of identity theft and place a fraud alert in your file
• Your file contains inaccurate information as a result of fraud
• You are on public assistance
• You are unemployed but expect to apply for employment within 60 days

4. If anyone, be it an employer or government agency, deny your application for employment or mortgage on the grounds of credit report, you have the right to get the specific piece of information due to which your application has been rejected. Also, the agency/company must give you the name and contact details of the agency that performed the check.
5. If an employer/agency pulls out some negative information from your file and it turns out to be incomplete or inaccurate, you can dispute it with the consumer reporting agency. In such a case, the agency becomes liable to perform a re-investigation and subsequently, remove/rectify the information within 30 days.
6. You have the right to file a suit against consumer reporting agency for violations of FCRA.
7. You have the right to get negative information removed from your file if it is 7 years old (10 years in case of bankruptcy). However, criminal records are exceptional and may remain in your file for an indefinite period of time.
8. You are also entitled to know who requested your credit report in the past one year.
9. As an active duty military personnel and an identity theft victim, you are entitled to some extended rights in addition to the standard rights.

Credit report consists of sensitive information that can make or break the consumer’s credibility among potential lenders, insurers and employers. The provisions of this act empower the consumers and make sure that such information does not become vulnerable to misuse by negligent parties. At the same time, it ensures that Consumer Reporting Agencies comply with the law and furnish correct and complete consumer information in the report.