Fair Credit Reporting Act

Definition

Federal law giving individuals the right to examine their own credit history. The provisions of this law enable consumers to approach credit reporting agencies to see what the agencies may be saying about them, find out if their credit information has been used any third parties, and approach an agency to dispute wrongful use or interpretation of their information.

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Credit Reports
Overview of Credit Reports and Their Content
by InvestorGuide Staff (Write for us!)
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If you've ever applied for a charge account, a personal loan, insurance, or a job, there's a file about you. This file contains information on where you work and live, how you pay your bills, and whether you've been sued, arrested, or filed for bankruptcy. Companies that gather and sell this information are called Consumer Reporting Agencies (CRA's). The most common type of CRA is the credit bureau. The information CRA's sell about you to creditors, employers, insurers, and other businesses is called a consumer report, or in the case of credit bureaus, a credit report.

Checking your credit report is the best way to gauge the risk you pose to prospective lenders such as banks, loan officers, and landlords. Getting your credit report is easy, and can be done online. The "Big Three" credit bureaus are Experian, Equifax and TransUnion.

Equifax, P.O. Box 740241, Atlanta, GA 30374-0241 (888) 766-0008.
Experian, P.O. Box 2002, Allen, TX 75013 (888) 397 3742.
Trans Union, P.O. Box 2000, Chester, PA 19022 (800) 916-8800.

While many lending institutions report consumer credit information to all three bureaus, some report only to one, so your credit report might differ slightly from one bureau to another. You can order your credit report from each agency individually, or order all three at once from sites such as TrueCredit. We recommend that you check your credit report at least once every two years, and immediately prior to any significant borrowing you're anticipating.

Getting your credit report isn't free (usually), but it is inexpensive. Credit bureaus can charge no more than $8 for your report. However, there's no charge if a company takes adverse action against you, such as denying your application for credit, insurance or employment, and you request your report within 60 days of receiving the notice of the action. The notice will give you the name, address, and phone number of the credit bureau to contact. In addition, you're entitled to one free report a year if you can prove that you're unemployed and plan to look for a job within 60 days, or if you're on welfare, or if your report is inaccurate because of fraud.

Here is what you will find on your report:

1. Identifying information: your name, current and previous addresses, Social Security number, year of birth, employment history and income, and home ownership.
2. Credit information: information for each account you hold, such as date opened, credit limit or loan amount, balance, monthly payment and recent payment history. This information is gathered from a large number of sources, including banks, credit unions, credit card issuers, mortgage and loan companies, landlords, insurance companies, professional service organizations, and others.
3. Public record information: information from government agencies, including federal district bankruptcy records, state and county court records, tax liens, monetary judgments, and (in some states) overdue child support, for the last 7 years (sometimes 10 for bankruptcies).
4. Inquiries: the names of anyone who has requested a copy of your credit report within the past year (or the past two years for employment-related inquiries).

Your credit report doesn't include information about your race, religion, medical history, personal lifestyle, political party, or criminal record.

Another important feature of a credit report is a credit risk score. This information is sometimes provided to a credit grantor, but it usually won't be included in the copy of your report that you receive. A credit risk score is an quantitative evaluation of a person's creditworthiness based on an analysis of that person's credit report. The calculation is based on a complex weighting of many factors, including payment history, outstanding debt, credit history, pursuit of new credit, and types of credit in use. Although different credit scoring systems exist, the most common is the Fair Isaac (FICO) score. Credit scores range from 375 to 900, with 650 being about average. A higher score indicates better creditworthiness. As your credit history changes, your credit score will change.

In addition to the standard credit reports, there are also specific-purpose reports for certain circumstances. The two most common are the mortgage report and the employment report. Both are similar to standard credit reports but focus on certain areas relevant to mortgages or employment while ignoring others.

Credit Basics
An Overview of Credit Regulations
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Now that you've seen that information about you is being collected and distributed without your consent, you may feel that your privacy has been invaded, and to some degree you would be right. But it's a necessary evil, since lenders wouldn't lend to you if they weren't able to estimate the risk it involved (or at the very least, the lending process would be grossly inefficient). Fortunately, the government has taken significant steps to protect your rights. As we mentioned above, the credit report does not contain personal information not relevant to the lending process, such as your religious or political affiliation. For the information that does appear in the report, there are strict rules about their use which are intended to safeguard your rights. The three most important federal acts are described below. You may have additional rights under state laws. Contact your state Attorney General or local consumer protection agency for more information.

The Fair Credit Reporting Act (FCRA), enforced by the Federal Trade Commission, is designed to promote accuracy and ensure the privacy of the information used in consumer reports such as credit reports. Recent amendments to the Act expand your rights and place additional requirements on credit bureaus and other consumer reporting agencies (CRA's). Businesses that supply information about you to CRA's and those that use consumer reports also have new responsibilities under the law.

First, you have a right to know what's in your report. The CRA must tell you everything in your report, including medical information, and in most cases, the sources of the information.

Second, only people with a legitimate business need are able to get a copy of your report. For example, a company is allowed to get your report if you apply for credit, insurance, employment, or to rent an apartment. That company must also sign a contract agreeing to use the data properly. A CRA may not supply medical information about you to anyone without your consent. Additionally, a CRA may not supply information about you to your employer, or to a prospective employer, without your consent.

Third, the CRA must give you a list of everyone who has requested your report within the past year (two years for employment-related requests). The Equal Credit Opportunity Act requires that anyone who takes action against you in response to a report supplied by a CRA - such as denying your application for credit, insurance, or employment - give you the name, address, and telephone number of the CRA that provided the report.

Fifth, you have the right to opt out of unsolicited offers from creditors. Creditors and insurers may use CRA file information as a basis for sending you unsolicited offers. These offers must include a toll-free number for you to call if you want to remove your name and address from lists for two years; completing a form that the CRA provides for this purpose will keep your name off the lists permanently. Equifax, Experian, and Trans Union have websites which explain marketing list opt-outs and how to request them, but you cannot opt out online.

Finally, you have a right to dispute your credit report if it is in error .

The Equal Credit Opportunity Act (ECOA) is designed to protect you against discrimination by creditors for any reason (other than your creditworthiness). The ECOA forbids creditors from requiring you to state your sex, race, national origin, or religion, and cannot deny you credit for these reasons, or for your age, or for the fact that you receive public assistance.

The Fair Debt Collection Practices Act (FDCPA) is designed to prevent debt collectors from engaging in unfair, deceptive, or abusive practices. Debt collectors must identify themselves to you on the phone, may contact you only between 8 am and 9 pm, and may not contact you at work if they know your employer disapproves of it. In addition, they may not harass or abuse you, or lie to you, and must stop contacting you if you ask them to in writing.

Credit Reports
How to Contest Errors in Your Credit Report
by InvestorGuide Staff (Write for us!)
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Many credit reports accumulate errors over time and some of these errors can be serious enough to lead to a denial of credit. For this reason it is important to fix any incorrect information as soon as you discover it.

Both the CRA and the information provider have responsibilities for correcting inaccurate or incomplete information in your report. To protect all your rights under this law, contact both the CRA and the information provider. In both cases, include copies of documents which support your position, and send your letter by certified mail return receipt requested, so you have proof that they received it.

First, tell the CRA in writing what information you believe is inaccurate.

* Experian's National Consumer Assistance Center
P.O. Box 2002
Allen, TX 75013
* Equifax Information Services
P.O. Box 740241
Atlanta, GA 30374-0241
* Trans Union Corporation
P.O. Box 2000
Chester, PA 19022


This letter should include your full name, current mailing address and previous addresses for the last five years, your Social Security number, your date of birth, your spouse's name and Social Security number (if applicable), the name and account number of the creditor and item you're disputing, and your explanation of the error. CRAs must reinvestigate the items in question -- usually within 30 days -- unless they consider your dispute frivolous. They also must forward all relevant data you provide about the dispute to the information provider. After the information provider receives notice of a dispute from the CRA, it must investigate the matter, review all relevant information provided by the CRA, and report the results to the CRA. If the information provider finds the disputed information to be inaccurate, it must notify all nationwide CRAs so that they can correct this information in your file.

When the reinvestigation is complete, the CRA must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the CRA cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the CRA gives you a written notice that includes the name, address, and phone number of the provider.

Second, tell the creditor or other information provider in writing that you dispute an item. Many providers specify an address for disputes. If the provider then reports the item to any CRA, it must include a notice of your dispute. In addition, if you are correct -- that is, if the information is inaccurate -- the information provider may not use it again.

If the CRA or information provider won't correct the information you dispute, ask the CRA to include your statement of the dispute in your file and in future reports. If you request, the CRA also will provide your statement to anyone who received a copy of the old report in the recent past. There usually is a fee for this service. If you tell the information provider that you dispute an item, a notice of your dispute must be included anytime the information provider reports the item to a CRA.

Although the Federal Trade Commission can't act as your lawyer in private disputes, they do investigate complaints to detect patterns. Send your questions or complaints to: Consumer Response Center, Federal Trade Commission, CRC-240, 600 Pennsylvania Ave NW, Washington, D.C. 20580. If push comes to shove, you may sue a CRA, a user or (in some cases) a provider of CRA data, in state or federal court for most violations of the FCRA. If you win, the defendant will have to pay damages and reimburse you for attorney fees to the extent ordered by the court.

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