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Understand the Fair Credit Reporting Act (FCRA)

The Fair Credit Report Act (or "FCRA") is a federal law of the United States, passed in 1970 and enforced by the United States Federal Trade Commission. The act is intended to protect individuals and businesses by limiting the ways in which credit information may be shared. The FCRA has direct effects on anyone whose credit information is regularly used by consumer credit reporting agencies (or "CRAs"). The three primary U.S.-based credit reporting agencies are Transunion, Equifax and Experian. Other information-gathering companies, such as LexisNexis or Westlaw, may also be subject to some of the stipulations of the FCRA, even though they are not credit reporting agencies. Since credit history can have a great impact on qualifying for a job, mortgage or loan, it is highly advisable to familiarize oneself with the particular rights that are granted by this federal law.

Access to Information

One primary focus of the FCRA is to stop CRAs from distributing false or harmful credit information about individuals. Therefore, one basic right that you have, due to the FCRA, is the ability to consult any credit information that CRAs have on file. If some action has been taken against you as a result of the information on file, and you request the info within 60 days, then there is no charge for you to access the information. Otherwise, you may be charged a nominal fee to access your credit information. In addition, the FCRA entitles you to receive notification if your file is accessed and, as a result of this information, any action is taken against you. For example, if a credit card company denies your application for credit due to the information they receive from the CRA, you must be informed. Since 2003, the Fair and Accurate Credit Transactions Act ("FACTA") has further streamlined the process, making it easier for consumers to view reports and make disputes. In addition, the FCRA has been gradually modified over the years since its first passing, to more accurately and comprehensively serve the consumer.

Right to Dispute False Information

In addition to your right to see the information that a CRA holds on file about your credit history, you also have a right to dispute any information you find to be incorrect. Many consumer credit reports contain errors, of various degrees, with some estimates putting the number of reports with erroneous information at over 70 percent. Therefore, one important component of the FCRA is to entitle you to the right to dispute any false information you find. If you do so, the CRA must then investigate your claim, typically within a period of 30 days. They must do so by submitting your case to the corresponding source of information. If the information is found to be incorrect, the CRA must update your file appropriately, usually within one month of your dispute. In addition, if you dispute a claim against you directly with a creditor or other third party, then that creditor cannot report their alleged information to the CRA without also including a notification that you have disputed the allegation.

Limitations on Information Sharing

In addition to ensuring accuracy, the FCRA is designed to protect the privacy of your credit history information. Therefore, the law puts certain limitations on access to the files held by CRAs. If potential employers request reports, you must sign off your permission before the CRA will release this information. Likewise, any information held by a CRA that includes health-related information can only be released with your written consent. You may also limit the way that your information is spread by omitting your name from CRA lists that are used for unsolicited credit or insurance offers.

Consequences of Noncompliance

If the tenets of the FCRA are not upheld by a CRA, this noncompliance may result in required payments to the individual affected by the breach. In other words, if your credit information is unfairly withheld or unfairly distributed, or if false information is not corrected in a just and prompt manner, the CRA may owe you a sum corresponding to the damages. Depending on the case, you may also be entitled to punitive damages and any reasonable attorney's fees. The statute of limitations for these infractions is five years from the date that the misdeed is discovered.

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