Guide to using the Fair Credit Reporting Act to your benefit

What is the Fair Credit Reporting Act?

The Fair Credit Reporting Act (FCRA), passed in 1970 by Congress, protects consumers from possible credit bureaus' practices while protecting businesses' ability to check credit reports. For instance, potential employers, credit grantors and insurance companies can use credit reports to determine customers' credit risks.

Prior to the passing of the Fair Credit Reporting Act, consumers didn't have the right to know the information listed on their credit reports. Thus, you couldn't order your credit report because you didn't have a right to the information. If anyone found out there was inaccurate information on their credit reports, it was too bad. No procedures existed to change them. Also, there was no way to tell if someone had stolen a person's identity.

FCRA Summary

The Fair Credit Reporting Act provides consumers different rights when it comes to repairing credit. However, it doesn't do the job for consumers. Thus, people have to do some work to eliminate questionable or negative credit information. For example, if you notice a collection account listed on your credit report. You decide not to do anything about it or procrastinate until you have a reason such as buying a house. The rights in the FCRA summary won't help your credit score, if you don't do anything to change that negative collection account. The following is just a portion of the FCRA summary, a person has the right to know:

  • If his credit report has been used to take an adverse against such as denying a job or credit
  • The information in the credit report
  • Ask for his credit score
  • Also, a person has the right to:
  • Dispute inaccurate or incomplete information in the credit report
  • Give potential employers credit to view the credit report
  • Opt-out of prescreened offers pertaining to insurance and credit
  • Sue the businesses or individuals who violate the information in the FCRA summary

The credit reporting agencies are also required to do things like delete unverifiable, inaccurate or incomplete information. Also, they can't report negative information for an indefinite time. For example, a judgment, where a business or person wins a lawsuit against another, can only stay on the individual's report for a specific time. Typically, it's seven years.

In addition, all consumers are entitled to a free credit report when certain things happen like:

  • Being a victim of identity theft
  • Adverse action like a denial of credit
  • Inaccurate information that results from fraud
  • Unemployed (expect to apply for employment within 60 days of last job)
  • On public assistance
  • One time each year

The Fair Credit Reporting Act has done a lot to regulate businesses and credit bureaus and help consumers with credit issues. Using the provisions in the FCRA wills many consumers remove negative information from their credit report in a way they couldn't do prior to the 1970s. The Act isn't rigid, but constantly changeable. The U.S. Federal Commission (FTC) and Consumer Financial Protection Bureau (CFPB) share responsibility for implementing, enforcing and overseeing the laws.