FCRA – Understanding Your Rights! Part 1
The Fair Credit Reporting Act (FCRA) was passed over forty years ago in response to concerns over credit report errors and privacy breaches.
Credit report errors easily damage customer credit ratings. For instance, someone on the borderline between bad and good credit ends up on the wrong side of this border. Such changes in credit ratings have serious consequences. Bad credit scores limit financial freedom in a number of ways. It becomes harder to get loans on good terms and to find suitable apartment and car rentals. Sometimes, a poor credit score convinces an employer to withdraw their job offer. These are some main reasons for public concern over the information credit bureaus gather, analyze, and pass on to interested parties.
The FCRA protects consumer interests by requiring, “accuracy, fairness, and privacy of information in the files of consumer reporting agencies.” It gives citizens the right to take legal action if they believe a credit bureau (consumer reporting agency) is in breach of the law.
The Right to Know
The FCRA gives each person the right to know the information that appears in the credit bureau files. Each year they can ask for a free copy of their credit report from the three major bureaus. The bureaus need to supply the customer with a copy of their file in special situations – identity theft or fraud for example. Copies of credit scores also need to be supplied on request, although a small charge may be made.
This section of the law allows everyone to check their credit record for mistakes. If a customer finds an error and has bank statements or other evidence to support their claim, the credit bureau needs to correct their record. Congress set a 30-day limit for them to examine the customer’s claim. If the customer fails to prove the bureau’s information wrong, they still have the right to supply their own explanation of this contested item. The bureau needs to add the customer’s statement to their file.
In addition to making sure all details are accurate, customers can demand that outdated information is removed. For example, the bureaus have no right to keep loan repayment delays or defaults on file after seven years. However, bankruptcies wait ten years to be erased. Anyone who found themselves on the wrong side of the law in earlier years has no right to get old criminal records removed from credit bureau files.
The law also obliges bureaus to alert customers when a financial institution supplies them with information likely to lower their credit rating. If a bank rejects a loan request or an employer rejects a job application due to credit information, the customer has the right to ask for details.
The FCRA restricts the kind of data credit reports can legally include. For example, they cannot include customer medical details.
While the FCRA allows a customer access to his or her own credit reports, it restricts access to others. It forbids requests for a copy of your credit report without a valid reason. The bureaus only supply credit details to banks, insurance companies, apartment owners, and employers who need to know a person’s credit status. This information lets them assess the risks of lending money, entering a rental agreement, or hiring a new employee.