Fair Credit Reporting Act (FCRA)
5 ways the FCRA protects your rights to credit report accuracy and privacy.
The Fair Credit Reporting Act (FCRA for short) is a crucial piece of legislation when it comes to your credit rights, because it protects your rights to both credit report accuracy and privacy. In other words, it helps ensure that the information contained in your publicly available credit profile represents your credit worthiness accurately. It also helps prevent just anyone from requesting and accessing your credit report, since only certain people are legally permitted to view an individual’s personal credit information.
The information below is designed to help you understand what the FCRA really says in simple terms, and how this protects your rights as a consumer. If you have questions about your credit or how your credit report may be used during the credit counseling call Consolidated Credit today at to speak with a certified credit counselor.
A little history of the Fair Credit Reporting Act
The FCRA was originally passed in 1970, but it’s updated regularly because it’s such an important piece of legislation when it comes to consumer credit rights. The most recent revision came in 2011, although several new proposals and bills to the revise the FCRA have been issued in Congress since then – one major overhaul in 2014 and then again in 2015, this time focusing on credit checks by employers.
As you can see, the FCRA is still a big deal even almost 50 years since it was first written. It’s also constantly evolving – or Congress is at least regularly looking into ways to improve it to better protect consumers from unfair reporting practices. Basically the FCRA is the federal government’s way of regulating what private credit bureaus like Experian, Equifax and TransUnion can put in your credit report and who they can and can’t give it out to when it’s requested. It also ensures the accuracy of the information contained in your report.
FCRA Protection No. 1: Who can review your credit profile
The first and biggest role the Fair Credit Reporting Act plays in your life is who credit reporting agencies (i.e. the credit bureaus mentioned above) can give your report to when it’s requested. These organizations essentially hold one of the major keys to your financial life in their hands, and that report contains highly sensitive financial information. So you don’t just want anyone to be able to get their hands on your report.
So in a day where people can search online for your physical address, your contact information, and even your criminal record, one thing that should never be available publicly is your credit report. Unless the FCRA goes away completely, someone should never be able to go online and find a directory of consumer credit reports online – and that’s a good thing!
There are only a certain number of reasons a business, organization or agency can request your report to review all or part of your profile:
- For credit/loans. Credit card companies and loan service providers can request your full public report with your authorization for the purpose of reviewing your credit worthiness when you apply for a new loan or line of credit. This is known as a hard credit inquiry.
- They can also pull batches of credit reports for the purpose of making marketing offers for credit and loans to a group of consumers. This does not pull your full report and does not create a hard credit inquiry that would affect your credit score (it’s actually called a soft inquiry).
- For insurance. Insurance providers are permitted to pull your credit report for review in much the same way – if you apply for insurance then they can pull your credit for review or they can pull limited profiles in order to make offers to extend insurance to a group of eligible consumers. The information contained in your credit report is used by insurance companies to determine your credit-based insurance score.
- For court cases. Your credit report can also be provided in response to court orders that are made in the appropriate jurisdiction. Credit reports are commonly used in divorce proceedings, child support cases, and bankruptcy settlements.
- State and local child support enforcement agencies are also permitted to pull your report for the purposes of (1) setting your initial payment and (2) for support modifications.
- There are also now clauses that allow the FBI and other government counterterrorism agencies to pull credit reports for the purpose of identifying potential terrorist threats or the financial backing of such threats.
- For employment. Your credit report can be pulled by employers doing background checks during the hiring process. You must authorize this credit check in order for the business to obtain your report. When the employer is a government agency, your report may also be pulled to determine license eligibility if the job requires you to be verified as finically responsible.
- For bank closures. If your bank or a credit provider who was servicing a loan or line of credit for you closes, then the FDIC or National Credit Union Administration can pull the reports of all customers of the closed organization.
There are some limits to when a credit report can be provided, too, and the credit bureaus are often responsible for ensuring minimum standards are met:
- Reports can’t be provided for anyone under the age of 21.
- Information can’t be provided until the requesting entity is verified as legitimate.
- If the bureau believes a requester is using the information in your report unlawfully, they can’t provide it.
- Medical information included in your report (with regard to insurance and things like medical debt collection) must be properly coded so things like condition and treatment can’t be gleaned from the financial information provided in your report.
FCRA Protection No. 2: What can be said about you
The second key piece of the Fair Credit Reporting Act limits what can be reported about you when it comes to information that could negatively influence your credit worthiness. In general, the FCRA limits the amount of time negative information can be reported to 7 years – usually from the date the negative information was incurred, noted, etc. In a few cases, negative information can remain longer if it relates to a specific financial concern, such as bankruptcy.
- Account charge-offs by your original creditors can only be listed for seven years from the date the account status was changed.
- Payments that were more than 30 days can be noted, but only seven years from the date the payment was missed.
- Collection accounts can only be listed seven years from the date the account was initially sent to collections (originally – i.e. the clock doesn’t reset if the collection account is sold to a debt buyer or another collection company).
- Paid tax lien can be reported for seven years from the date of payment – unpaid liens can show up in your report for up to 15 years.
- Bankruptcy cases cannot be reported for more than 10 years from the date of entry or adjudication.
- Civil suits, judgments and arrest records can only be reported seven years from the date of entry or when the statute of limitations has expired (whichever is longer)
- All other adverse information (except records of criminal conviction) can only be reported for no more than seven years.
As stated in the first section, medical information must be coded correctly so that sensitive health information isn’t recognizable within it. Finally, only up to the last 5 digits of an account number can be included.
FCRA Protection No. 3: Ensuring information accuracy
Any agency who maintains a credit report on you as a consumer is required to follow “reasonable procedures” to ensure the maximum level of accuracy possible when information is provided on you. They also have to provide a means for you to correct information that you believe is inaccurate.
This is what the Fair Credit Reporting Act says about how a consumer can dispute something that’s in question:
- When a dispute is submitted, the agency MUST investigate it free of charge.
- They must provide a response be the end of a 30-day period starting from the date the dispute was received – unless relevant info relating to the dispute is received during that time, in which case the bureau can extend an extra 15 days to have time to reinvestigate.
- When the dispute is received, the bureau must contact the creditor, lender, collector or financial institution from which that information originated within 5 business days.
- The agency has a right to terminate an investigation if it’s deemed frivolous or irrelevant – if so, they must inform the consumer within 5 business days.
If disputed information can’t be verified, it has to be removed from your credit report. The provider has to be notified and the info can’t be reinserted without informing the consumer. If a dispute is rejected, the consumer has a right to submit a 100-word statement explaining the dispute. This ability to dispute is further defined and regulated by the Credit Repair Organizations Act.
FCRA Protection No 4: Ensuring you’re aware of negative information
Of course, you’re only able to dispute information that could be inaccurate in your credit report if you know it’s there. Luckily, the Fair Credit Reporting Act gives you ways to find out about negative information, too.
Here’s how you can find out about negative information:
- Review your free credit report each year. The FCRA actually requires the bureaus to offer a way for consumers to request a free copy of their credit report once every twelve months from a centralized location (annualcreditreport.com).
- If you’re rejected for something because of your credit report. If a business denies you credit, a loan or insurance – or an employer rejects your employment during the hiring process, they can inform you of what negative information contained in your report led to that decision.
- If negative items get reinserted. If you make a dispute to have something removed and then the bureau receives new information that verifies that item, they must tell you what is being added back in and why.
- If you pay for additional copies of your report. Whether you go through an agency or a credit monitoring service that’s a reseller of credit report information, you can review your credit report to identify negative information. The FCRA also limits the amount that can be charged for reports. The fees are set by the FTC and were $8 prior to 2011 – $11 after 2011.
FCRA Protection No 5: Fraud and identity theft protection
The last important protection offered by the Fair Credit Reporting Act deals how your credit reports can be used for the purpose of identity theft prevention if your personal information or data is compromised by account theft or fraud. There are also fraud protections for active duty military service members.
- Initial fraud alert. If you believe you’re the victim of ID theft, you can place an initial fraud alert that gets included in your report for 90 days from the date the request was made, unless you authorize for it to be removed.
- The alert must be included in your report and provide with any scores generated from that report
- You’re entitled to a free copy of your credit report if this alert is placed so you can monitor for fraud.
- Extended fraud alert. If further protection is needed an extended fraud alert can be placed and stays in place for seven years from the date of request unless you ask for it to be removed.
- Your name cannot be included in pulls for credit, loan and insurance offers for 5 years from the date the request was made.
- You’re allowed 2 free copies of your credit report in the 12-month period starting from when the alert was placed.
- Active-duty fraud alert. If you are a military service member on active duty, you can request this special fraud alert when you get deployed.
- It’s provided for 12 months from the date of request, unless you ask for it to be removed.
- It stops credit and insurance offers for 2 years from the date of request.
All alerts prohibit the establishment of new credit plans or loans, as well as the issuance of new cards on existing accounts. It also prohibits credit limit increases that are not specifically authorized by the consumer.