What is FCRA (Fair Credit Reporting Act)?

Having good credit opens many doors in life. Having bad credit can close them. But what happens if inaccurate information is unfairly damaging your credit score? The Fair Credit Reporting Act was established, in part, to answer that question.

Why does this act matter for consumers like you? As you’re about to discover, the Fair Credit Reporting Act grants you several critical legal protections. 

What is the Fair Credit Reporting Act?

The Fair Credit Reporting Act, or FCRA, was passed in 1970 to regulate the handling of consumers’ credit information. 

The three major credit bureaus (Experian, Equifax, and TransUnion) gather available data for anyone with a credit history. Then, complex calculations are used to create a credit score based on that data.

When you apply for a credit card, a loan, or any other kind of credit, the lender will check your credit score and one or more credit reports. 

But even if you never apply for credit again, your credit score matters. Landlords, insurance companies, and even some employers may be able to access your credit score when making decisions.

What is the purpose of Fair Credit Reporting Act? Because credit plays such an important role in American life, it was only right to pass a law that:

• Made it easier for Americans to monitor their credit reports
• Established a clear procedure for disputing errors on credit reports
• Gave consumers the ability to freeze credit when needed
• Limited who can view a particular person’s credit report
• Allowed consumers to opt out of targeted advertising based on their credit scores
• Established a timeline for negative items to be removed from a credit report

FCRA has been modified in the decades since its passing, but the focus is still the same: to encourage transparency and protect consumer rights.

Key consumer protections under FCRA

FCRA is one of the cornerstones of American consumer rights legislation, and it establishes several critical protections. Here are a few ways that FCRA safeguards you and other consumers from fraud and unfair business practices.

Your credit information isn’t available to just anyone

You are allowed to access your own credit information, but your credit report isn’t available to just anyone. Only someone who has a “permissible purpose” may view your credit file. 

Businesses and people with a permissible purpose may include the following:

• A lender deciding whether to extend you credit
• An insurance company determining how to set your rates
• A landlord evaluating your housing application

Additionally, some states allow employers to check your credit when evaluating job applications. Even in states where this is legal, you must give written permission for the employer to view your credit report.

You have the right to know if information in your credit file is used against you

If information contained in your credit report led to your application for employment, insurance, or a loan being denied, you have the right to be told why. 

You have the right to dispute information on your report

You may dispute inaccurate information on your credit report. When a credit bureau receives a dispute, it must investigate it. If the bureau finds that the information is indeed inaccurate, it must remove it from your credit report.

Even if a negative mark on your credit report turns out to be accurate, it won’t be there forever. FCRA requires negative information to be removed from your credit report after a certain period of time. Usually, that time period is 7 to 10 years.

You can opt out of prescreened credit card offers

Credit card companies often send out prescreened offers to try to convince consumers to take out new cards. If you’d rather not receive these offers, FCRA gives you the right to opt out.

You may put a security freeze on your credit

If you’re concerned about identity theft or just don’t want anyone to access your credit reports, FCRA allows you to put a security freeze on your credit. With the freeze in place, almost no one will be able to view your credit report. If anyone tries to open a new account in your name, they will be unsuccessful.

You must unfreeze your credit or generate a PIN that gives a specific lender one-time access if you want to apply for new credit.

You have the right to access all information in your file

FCRA gives you the right to request full file disclosure. That means you have the right to see all of the information a credit bureau has about you. You can request one free file disclosure from each of the three credit bureaus (Experian, Equifax, and TransUnion) per week. You can access these disclosures at AnnualCreditReport.com.

What is AnnualCreditReport.com?

AnnualCreditReport.com was created by federal mandate. Specifically, it was created after the passage of the Fair and Accurate Credit Transactions Act (FACTA) in 2003. FACTA amended FCRA.

The name “AnnualCreditReport.com” is a little misleading. Federal law entitles you to a free copy of your credit report from each credit bureau every 12 months. However, after starting a temporary program that allowed Americans to get weekly credit reports for free, Experian, Equifax, and TransUnion all decided to make the program permanent.

This means that you can visit AnnualCreditReport.com each week and get three copies of your credit report, one from each bureau.

Even if you don’t check your credit report every week, it’s still a good idea to check it regularly. Look for anything you don’t recognize so you can dispute it.

When it comes to credit report errors, catching them sooner is always better. This is especially true if you’re a victim of identity theft. Once someone steals your identity and thinks they’ve gotten away with opening an account in your name, they’ll be more likely to do it again.

Conclusion

FCRA helps protect consumers against inaccurate credit reporting. But if you have several accurate negative items on your credit report, you might wonder whether there’s anything you can do to improve your credit while you wait for these items to fall off.

Fortunately, there is. A positive payment history is the most important factor when it comes to determining your credit score, and Kikoff is dedicated to helping people with poor credit, no credit, or very little credit establish payment histories.

When you sign up, you can access an interest-free credit line that you then use to make purchases in the Kikoff store. You pay off your purchases over time, and we report your on-time payments to all three credit bureaus.

It only takes a few minutes to start, and we don’t run a hard credit inquiry. Sign up with Kikoff to begin your credit-building journey today!