What is the Fair Credit Reporting Act (FCRA) & Why Does it Matter?

Your Rights Matter Because of the Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act (FRCA) was a federal law that was passed by Congress April 25th, 1971 in order to protect consumers from predatory behavior by individuals, financial institutions, and business, and derogative information reported by credit bureaus, medical information companies, and tenant screening services. The passing of the FCRA also created legal obligations including mandatory investigative duties upon disputed information that creditors have to abide by; upon failing to do so, possible lawsuits in some cases, as well as removals of inquired information can be the consequence.

That said there are Four Major Rights the Fair Credit Reporting Act provides you as a consumer, and in this article, we are going to be dissecting what the law says is the appropriate way to handle your credit record.

1) What Data is On Your Credit Report

Before the Fair Credit Reporting Act, there was a common trend of reporting arbitrary and irrelevant information on your credit report that could only be misused by businesses and individuals. The information on the old way of reporting your credit would include religious beliefs, ethnicity, habits including personal hygiene, stable employment history, and even odd profiling observations like “person smelled of alcohol” if credit reporting agents visited your home.

The old model was truly biased, and information like what was mentioned above use to be attached to your credit report, with the distorted idea that if you were a certain race or a certain religious belief- you may be less creditworthy overall.

However, once Congress passed the FCRA, this information became totally illegal to report on the credit reports and has been replaced with

Basic Identifying Information: Name, address, Social Security Number, Date of Birth.

Tradelines History: How many credit accounts do you have open, like credit cards, mortgages, student loans, auto loans, etc. Additionally, this information also shows rotating debt, credit limit, and your overall payment history.

Inquiry Information: The inquiry section of your credit report includes information regarding the companies that have pulled a copy of your credit report.

Bankruptcies and Collections Information: Finally the last section of your credit report os all collections account and past due payments.

2) Who Is Allowed to View Your Credit Report

According to Federal Law, businesses have the right to conduct a check on your credit before they agree to do business with you, however, it still is contained and limited to businesses that under the proper circumstances find it appropriate and vital to the transaction. So while you’re also able to receive one free credit report a year and unlimited soft inquiries from various services such as Creditkarma.com or Experian.com, your private information is completely confidential between you and a potential lender.

In short if you were to see your credit information on social media, print, etc without your permission you can quickly file a lawsuit for actual damages or $1,000 depending on whatever is greater.

To narrow the scope of who is allowed to see your credit report the most common companies and individuals that may be able to pull your score are: banks, creditors, landlords, utility companies, insurance companies, employers, government agencies, collection agencies, any entity with a court order to do so.

3) Length of Items on Your Credit Report

A balance was put in place limiting the maximum amount of time that a derogatory mark can be listed on your credit report, however, no minimum amount of time was every explicitly stated. When you have an account that went into collections the maximum amount of time this item is allowed to remain on your credit report currently is 7 years, while bankruptcy is 10 years. That said you can still attempt to work with creditors if you do have a derogatory mark and end up with a mark being removed, giving you a better appearance on your credit score.

4) How Disputes to Your Credit Report Are Handled

Once you’ve submited a dispute the creditor has a legal duty to investigate your claim. During this time period, your creditor has a limited amount of time (under 31 days) to mark the item in dispute as “under dispute” on your credit report. Expected response times to claims is 30 to 45 days and they are to inform you of the results of the investigation shortly after that. Furthermore, if creditors fail to update your report during this time frame, or respond back to you within this time frame, you as a consumer are able to have the item under dispute removed from your credit report.

Question for The Reader!

What are your thoughts of the Fair Credit Reporting Act, how can it be improved?

Were you or does anyone you know a person that affected by biased reporting prior to 1971?