What Is the Fair Credit Reporting Act?

May 5, 2020 | by Jacob Hamilton

what is a fair credit reporting act

The Fair Credit Reporting Act (FCRA) is a law that requires privacy, fairness and accuracy with your consumer credit information. It defines how credit reporting agencies, data furnishers and other entities can use, collect, access and share your data.

U.S. Congress passed the FCRA in 1970 to protect consumer information from any misuse of their information. The FCRA is enforced by both the Consumer Financial Protection Bureau (CPFB) and the Federal Trade Commission (FTC).

Below, we’ll dive into the purpose of the FCRA, how it protects you and other things you need to know.

What Is the Purpose of the Fair Credit Reporting Act?

The purpose of the FCRA is to ensure your credit information is fairly reported and to make sure you know the rights you have over your information.

Having clearly defined rights over how your information is used is important, when mass hacks and identity theft are common. Unauthorized use of information can result in marks that unfairly hurt your credit. Examples of this are maxed out credit cards and too many open accounts that either don’t belong to you or happen when your identity is stolen.

fcra protects against unfair use of reporting

Having clear regulations is also important since credit impacts so many things. Here’s a list of a few ways credit affects you:

  • Chances of being approved for things like credit cards and car loans
  • Terms offered for credit products like APR and repayment period
  • Approval for rental applications
  • Insurance rates
  • Job acceptances depending on your industry

How Does the FCRA Protect Consumers?

The FCRA defines and enforces rules on how information on your credit report can be accessed and used. Below are a few key parts of the FCRA outlined by the FTC.

  • Credit bureaus are required to delete unverifiable, inaccurate or incomplete information. This is normally done within 30 days.
  • Credit bureaus can’t report old negative information. Most negative items cannot appear on credit reports if they’re more than seven years old. Bankruptcies can appear on credit reports for up to 10 years.
  • Credit bureaus must limit access to your consumer credit information. Consumer credit reporting agencies can only give your information to those who have a valid need like creditors or landlords.
  • Credit bureaus must get your consent before giving your report to employers. You must give your written consent to the credit bureaus before your information is released to your current or future employer.
  • You’re entitled to know your credit score. Just like your credit report, you’re entitled to know your credit score. However, it’s not always free. You can ask the credit bureaus for your score.
  • You’re entitled to dispute any information that is inaccurate or incomplete. The credit bureaus must investigate any disputes you have with information you find is inaccurate or incomplete unless it is determined “frivolous.” Learn more about the dispute process from the Consumer Financial Protection Bureau (CFPB).

credit bureaus

  • Businesses and other entities are required to tell you if your consumer credit report information was used against you in their decision making process This is required for any decision that results in an adverse action, like when you’re passed over for a job or your credit card application is rejected.

In addition, they must give you the name, address and phone number of the credit reporting agency who gave them your information.

  • You’re entitled to know what information is in your file. The FCRA grants you the right to retrieve information about you that’s filed with the credit bureaus. This process is typically free and you have a right to access your information for free for a number of reasons

A few instances include: When you’re unemployed but expect to apply for a job within 60 days, when you’re a victim of identity theft, or if you’re on public assistance. You’re also entitled to a free credit report from each credit bureau every 12 months through Annual Credit Report.

  • You can restrict the “prescreened” credit and insurance offers you get based on your credit report. You read that right! You have every right to limit pre-approved credit card offers from coming in the mail. You can opt out with the credit bureaus at 1-888-5-OPTOUT (1-888-567-8688). The companies giving these offers must also provide a toll-free phone number to call if you’d like to remove yourself from their lists.

Opt out of getting pre screened

  • You have a right to put a “security freeze” on your credit report. Security freezes, also known as credit freezes, stop credit bureaus from releasing your credit information without your consent. Freezes prevent applications for things like credit cards and loans from being approved without your knowledge, but it can delay time-sensitive decisions like mortgage applications.
  • You have the ability to sue any entity who violates your rights under the FCRA. If the FCRA is breached by a credit bureau or other entity who uses your reports, suing in state or federal court may be an option.
  • Victims of identity theft and active duty military members have additional rights. The FCRA has special provisions for identity theft victims and active duty military consumers since both groups have special circumstances. Read more about your rights if you fall into either category and consult a lawyer well-versed in credit law if you’re unsure about your rights.

Who Does the FCRA Apply to?

The FCRA applies to the three major credit bureaus (Experian®, TransUnion® and Equifax®) in addition to all of the organizations that collect information that impacts your credit, like banks and credit card companies, and those that use your information to make decisions, like apartment complexes. Each entity has a handful of rules that they must follow.

Below, we’ll explain what rights you have in relation to all of these entities so you understand what standards they’re held to, what actions you’re entitled to take when your rights are violated and who is responsible for what.

FCRA Requirements for Consumer Credit Bureaus

As the entity that mainly holds and manages your consumer credit data, the credit bureaus are held to clear standards to ensure your information is safe and fairly used. Here are a few rights guaranteed by the FCRA in regards to the consumer credit reporting agencies.

FCRA Requirements for Data Furnishers

Data furnishers are the groups that provide credit bureaus with your information. Common data furnishers are credit card companies and student loan companies. They are required to fairly and accurately report your information to the credit bureaus. Below are the rules enforced by the FCRA that data furnishers must follow.

  • Let you know within 30 days about negative items reported to the credit bureaus
  • Inform the credit bureaus when you voluntarily close your own account
  • Have a process in place for responding to identity theft notifications from the credit bureaus
  • Refrain from reporting accounts that you reported were created as a result of an identity theft incident
  • Can’t report on inaccurate information

  • Promptly amend any incorrect information they’ve given to the credit bureaus

FCRA Requirements for Other Entities Who Use Your Credit Report

Those who use information from your credit report must also follow their own sets of guidelines. Apartment complexes fall under this category since many use your credit report or credit score as a part of their screening process. Insurance companies can also fall under this category since some use your credit score to determine your premium. We’ve listed out a couple requirements below for these groups you should know.

credit repair must follow

What Should I Do If My Rights Were Violated?

If you think your information isn’t handled fairly, you’re within your rights to contact your creditor, lender and the credit bureaus to let them know of the situation. You can also contact a credit repair professional if you’re unsure if your rights were violated or not sure about what steps to take. Get in touch with a credit repair consultant to learn about your options.

Jacob Hamilton

Jacob Hamilton

GM of CreditRepair.com

With his master's degree from the University of Phoenix, Jacob has been working as the General Manager for CreditRepair.com for 2 years. Jacob is passionate about consumer finances and doing everything he can to make credit repair accessible....

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