Article by Sergei Lemberg

The opportunity for every consumer to qualify for fair credit is one of the bedrocks of the American economic system, a fact which was cemented in law with the enactment of the Fair Credit Reporting Act – also known simply as the FCRA – in 1970.

Congress stressed that the banking system depends upon fair and accurate credit reporting. Consumer reporting agencies must “exercise their grave responsibilities with fairness, impartiality and a respect for the consumer’s right to privacy,” the law proclaims.

The FCRA was amended by the Fair and Accurate Credit Transaction Act (FACTA) of 2003.

A credit report contains details regarding a consumer’s basic identifying information, including full name, address, previous address, Social Security number, marital status and the number of children (if any). It also has financial information (income, bank accounts, value of car, mortgage), public records (liens, bankruptcies, arrests), credit accounts and their status, collection items, current employment and job history, requests for a credit report and certain health information. In addition, there is a section regarding disputed items.

Many consumers know about the FCRA only in terms of what is contained in their reports. However, there is much more involved and consumers should be aware of what the law can do for them.

The law strictly regulates the conduct of reporting agencies, which are entities that collect and sell credit and financial information about consumers. There are three nationwide consumer reporting agencies – Equifax, Experian and TransUnion. They are required by law, upon request by a consumer, to provide a free copy of a credit report once every 12 months.

Here are some key points regarding consumer rights when it comes to credit reporting.

Use of information against consumer

If a credit report is a basis for the denial of credit, employment or insurance, the entity making the denial must inform a consumer about the identity of the consumer reporting agency that provided the report.

Consumer entitled to know contents of file

A consumer has the right to know the content of all files on him or her that are retained by a consumer reporting agency. While payment of a fee may be required, there are many exceptions that require the agency to make the files available at no cost (for example, if information contained in the file is used in an adverse action against the consumer).

Credit score information

Consumers often fret about their credit score, which is a numerical grade that is meant to reflect an individual’s creditworthiness. The better the score, the better the chances for obtaining credit. Under the FACTA, a credit score can now be obtained with the payment of a fee.

Incomplete or inaccurate information

A consumer has an absolute right to dispute any inaccurate or incomplete information. Once it receives such a report from a consumer, a credit reporting agency must act on the complaint unless it is clearly not based on fact.

Correction or deletion of information

Any information that is inaccurate, incomplete or unverified must be properly addressed by a credit reporting agency. This means that normally, within 30 days, such information will be corrected or deleted.

Putting outdated negative information to rest

A consumer reporting agency is barred from reporting negative information that is older than seven years. In the case of bankruptcies, there is a 10-year limit.

Access to reports

The law places clear limitations on the ability to obtain a credit report on a consumer. Among the permissible reasons for obtaining a report are the following – the consideration of an application for credit, a rental or insurance; employment (with certain restrictions); a court order; professional licensing; a review of an account; and a decision regarding child support payments. Debt collectors do not have a permissible status to legally obtain a credit report.

Finally, it is always important to remember that the FCRA is a law with teeth. Consumers have a private right of action in federal or state court against consumer reporting agencies and those who improperly use credit reports. In some circumstances, there may even be violations of criminal law.

It is not always easy to be sure a consumer is getting a fair shake when it comes to fair credit. For a consumer with well-founded concerns about a reporting agency or the use of a credit report, it is often best to seek assistance from a competent professional service.