Your credit score is a snapshot of your current financial health. A credit score is a calculated number that takes into account not only your open lines of credit and outstanding debt, but also your ability to repay those debts. A good credit score makes it easy to lease a new vehicle or secure a mortgage as you look to buy a new home. On the other hand, a bad credit score can hurt you in more ways than you think.*
One mistake on your credit report can have a negative impact on your credit score. Errors range from outdated information on open loans and inaccurate information to misidentification. Fortunately, the Fair Credit Reporting Act (FCRA) exists to provide governance over the credit reporting industry, protecting the integrity of your credit score and privacy of the information contained within your report.
Overview of the Fair Credit Reporting Act (FCRA)
The FCRA is a United States federal law that was approved by Congress in May 1970, and signed into law by President Richard Nixon in October 1970. The law is designed to regulate the collection, dissemination, and use of consumer information, including your consumer credit rating. The FCRA is a companion law to the Fair Debt Collection Practices Act (FDCPA) that forms the foundation of consumer credit rights in the US.
Under the FCRA, credit reporting agencies (CRAs) are required to ensure that the information contained within your credit report is fair, accurate, and kept private. The law also protects your right to access your report, correct misinformation contained within the report, and even provides you with legal recourse to fight back against CRAs and information providers who violate your rights in this sector.
Who does the FCRA Apply To?
As mentioned above, credit reporting agencies are the primary target of the guidelines established in the FCRA. The language within the FCRA defines a CRA as “any entity that collects and furnishes credit information about you.” In the United States, the most common type of CRA is a credit bureau, of which there are three major entities:
However, while most people believe credit reporting begins and ends with the major credit bureaus, the FCRA also governs the behavior of entities that handle credit information. As such, the definition of a CRA also covers groups, companies, or individuals who collect and sell your credit information (for example, a background check) to landlords, employers, and anyone else that might make a credit decision about you.
Additionally, Section 603 of the FCRA classifies dozens of additional information technology companies known as “nationwide specialty consumer reporting agencies.” This term covers consumer reporting agencies that collect and maintain files on you and other consumers on a nationwide basis, often related to:
- Medical records
- Medical payments or debts
- Residential or tenant history
- Check writing history
Perhaps the most important thing you need to know here is your ability to check your credit information with these various agencies. While the FCRA requires the three major credit bureaus to provide you with annual access to your credit report through a central request system, these nationwide specialty consumer reporting agencies are not required to do so. These entities do have to offer a streamlined process for you to access your report, but you’ll need to dig a little more to find the toll-free telephone numbers to submit a request through.
The Role of Creditors in the FCRA
Your creditors are also governed by the guidelines of the FCRA. Creditors include banking institutions you have a home mortgage with, your credit card company, or an auto financing company. Third-party entities are also covered as creditors or information providers in the FCRA.
Obligations of CRAs Under the FCRA
The credit reporting agencies that handle your financial information are obligated, by the FCRA, to do the following:
- Provide you, upon request, with any and all information it has on file about you. You are entitled to one free, annual report from the three major CRAs. Fees vary for other entities.
- Provide you with your full credit report upon your request.
- Investigate information on your credit report that you dispute.
- Correct and/or delete information on your report that is inaccurate, incomplete, or unverifiable. CRAs have 30 days to complete this following receipt of a notice of dispute.
- Refrain from reporting old information. Generally speaking, information in excess of 7 to 10 years of age may not be included on your report.
- Limit access to your credit report to third parties. Only those with a “valid need” are allowed to view your credit history.
- Withhold disclosure of your credit report to an employer (current or potential) unless you consent.
Obligations of Creditors and Other Entities Under the FCRA
Creditors and other entities that report or store your credit information are obligated to adhere to the following actions under the FCRA:
- May not report to any CRA of your financial information that it knows, or reasonably believes, to be inaccurate.
- Must promptly update and correct inaccurate information previously supplied to a CRA.
- Must inform you of any negative credit information reported to a CRA within 30 days of doing so.
- Must notify a CR if you voluntarily close an account.
- Must establish and follow “reasonable procedures” for responding to identify theft notices by a CRA, and refrain from reporting information regarding accounts you previously reported stemming from identity theft.
Possible Action Under the FCRA
The goal of the FCRA is not simply to provide guidelines for CRAs, creditors, and those who use your credit report, but also to provide you as a consumer with options for recourse. If you find that any of these types of entities have violated your rights under the Fair Credit Reporting Act, you have the option to bring litigation against them in state or federal courts for damages.
Many complaints regarding violations can be brought to the attention of the Federal Trade Commission and Consumer Financial Protection Bureau, but you also have the freedom to pursue litigation through a private law firm.
As with any federal law, the FCRA contains a complex framework that is difficult for average Americans to fully understand. If you believe your rights have been violated under the FCRA, we encourage you to contact the legal experts at Fair Debt Lawyers. Our lawyers have an intimate knowledge of the FCRA, and can take action on your behalf to address inaccurate information on or improper use of your credit report.