Fair Credit Reporting Act Explained

Your credit report can affect numerous aspects of your life. It impacts your ability to get credit and the amount you pay for it, but that's not all. It can also affect your insurance rates, employment prospects and even your ability to rent a place to live.

Keeping our credit reports accurate and private is of the utmost importance. This is why the government created the Fair Credit Reporting Act (FCRA). Enacted in 1971, this law contains several provisions that govern how credit reports are maintained and used.

Terms of the FCRA

* Only certain organizations with legitimate business reasons may request an individual's credit report. These include creditors, employers, insurers, and in certain cases, government agencies. Other parties can only receive your credit report if you request it for them.

* Credit reporting agencies may distribute names and contact information of those for whom they maintain files for marketing purposes. You can, however, request that they do not distribute your information, and they must comply. Requests may be made by phone or mail.

* If a lender or other party denies credit or takes other adverse action based on information contained in a credit report, they must notify the consumer in writing. They must also provide the name and contact information of the bureau from which the report was obtained.

* Consumers are entitled to a free copy of their credit reports if they are denied credit or subjected to other adverse action based on information contained therein. They may also receive one free copy of their report from each bureau once a year under the Fair and Accurate Credit Transactions Act, an amendment to the FCRA that was passed in 2003. Credit bureaus may charge a fee for additional reports.

* Errors on your credit report may be disputed by writing to the credit bureau. The credit bureau must investigate your claim within 30 days, and if they find that the information was erroneous, they must remove it and notify the other major credit bureaus. If they do not remove the information, you may add a summary explanation to your report stating why you disagree with the decision.

* The amount of time that negative finance information may remain on a credit report is governed by the FCRA. Delinquencies must be removed no later than seven years from the original delinquency, and bankruptcies must remain on the report for no longer than ten years.

The FCRA makes it easier for us to keep track of the information on our credit reports, and it protects us from improper use of that information. Knowing our rights under this legislation can help us maintain an accurate credit report, which will make it easier to obtain credit.