What is FCRA (Fair Credit Reporting Act)?

Your credit report can affect whether you qualify for a loan, an apartment, insurance, or even certain jobs. When that much depends on the information in your file, you need a way to see what is being reported and challenge mistakes.

The Fair Credit Reporting Act gives you those rights. It also limits who can access your consumer reports and requires businesses to notify you when report information contributes to an unfavorable decision.

What is the Fair Credit Reporting Act?

The Fair Credit Reporting Act, or FCRA, is a federal law enacted in 1970. It regulates how credit bureaus, background-screening companies, and other consumer reporting agencies collect, share, and use information about you.

The law applies to consumer reports, which may include more than your traditional credit reports. Tenant-screening reports, employment background reports, insurance reports, and some banking-history reports may also fall under the FCRA.

Your credit reports and credit scores are related, but they are not the same thing. Equifax, Experian, and TransUnion compile information about your credit accounts into reports. Credit-scoring companies then use information from those reports to calculate scores.

What is the purpose of the Fair Credit Reporting Act?

The FCRA is designed to promote accuracy, fairness, and privacy in consumer reporting. Among other protections, it gives you the right to:

• Access information in your consumer reports
• Dispute inaccurate or incomplete information
• Know when information in a report contributes to an unfavorable decision
• Limit who can access your reports
• Place security freezes on your credit files
• Opt out of certain prescreened credit and insurance offers

The FCRA does not prevent businesses from using consumer reports. Instead, it establishes rules for when reports may be accessed, how information must be handled, and what rights you have when something goes wrong.

Key consumer protections under the FCRA

The FCRA gives you several ways to understand and control how your consumer-report information is used.

Your credit information is not available to just anyone

A person or business generally needs a purpose allowed under the FCRA to obtain your consumer report.

Permissible purposes may include:

• A lender reviewing an application for credit
• A landlord evaluating a rental application
• An insurer underwriting a policy, where allowed
• An employer conducting an employment background check with your written permission
• A company reviewing an account you already have

Marriage alone does not give someone permission to access a spouse’s separate credit report.

Employers also have additional responsibilities. Before obtaining a consumer report for employment purposes, an employer generally must provide a clear disclosure and receive your written permission.

You have the right to know when report information is used against you

If information in a consumer report contributes to an unfavorable decision, the business must provide an adverse-action notice.

For example, you may receive an adverse-action notice if report information contributed to a lender denying your application or offering less favorable terms. The notice generally identifies the reporting company that supplied the information and explains how to request a free copy of the report.

The reporting company did not make the lending or employment decision. However, reviewing the report can help you understand what information may have influenced it.

Employment decisions follow a slightly different process. Before taking adverse employment action based on a background report, an employer generally must provide a copy of the report and a summary of your FCRA rights. This gives you an opportunity to review the information before the decision becomes final.

You have the right to dispute inaccurate information

If your credit report contains an account that is not yours, an incorrect balance, a payment reported late when it was on time, or another mistake, you can dispute it.

You may submit a dispute to the credit bureau reporting the information. You can also dispute the information directly with the company that provided it, known as the furnisher.

Credit bureaus and furnishers generally must investigate a dispute within 30 days. Some investigations may take up to 45 days.

If the information cannot be verified or is found to be inaccurate or incomplete, it generally must be corrected or removed. Accurate negative information does not have to be removed simply because you dispute it.

Keep a record of your dispute: Save copies of the report, supporting documents, correspondence, and confirmation numbers. If you submit a dispute by mail, consider using a trackable delivery method.

Read more >> How to Dispute Credit Report Errors

Most negative information has a reporting limit

Accurate negative information can remain on your credit report, but usually not forever. Most negative account information can generally remain for up to seven years, while bankruptcies may be reported for up to 10 years.

The timeline depends on the type of information. For collection accounts, the reporting period generally relates to the original delinquency that led to collection, not the date a collector purchased the debt.

Paying a legitimate debt may update its status, but it does not necessarily remove the account or restart the federal credit-reporting period.

You can opt out of prescreened offers

Creditors and insurers may use information from consumer reports to identify people for prescreened offers. Receiving one of these offers does not mean final approval is guaranteed.

If you do not want to receive them, you can opt out for five years or permanently through OptOutPrescreen.com, the official service operated by the major credit bureaus.

Opting out may reduce prescreened credit and insurance offers, but it will not stop every form of marketing mail.

You can place a security freeze on your credit

A security freeze restricts prospective creditors from accessing your credit file, making new-account fraud harder.

Placing, temporarily lifting, and removing a freeze are free. You must contact Equifax, Experian, and TransUnion separately because a freeze with one bureau does not apply to the others.

A freeze does not:

• Stop unauthorized activity on existing accounts
• Prevent you from using your current credit cards
• Remove fraudulent information from your reports
• Change your credit score

You can temporarily lift a freeze when you plan to apply for credit.

If identity theft has already occurred: A freeze can help prevent additional new accounts, but it does not resolve existing fraud. Report identity theft at IdentityTheft.gov and follow the recovery plan provided.

Read more >> How to Report Identity Theft

You have the right to access your credit reports

Federal law gives you the right to obtain a free credit report from each nationwide credit bureau every 12 months. The bureaus also currently provide free weekly online reports through AnnualCreditReport.com.

AnnualCreditReport.com is the federally authorized website for requesting reports from Equifax, Experian, and TransUnion. You do not have to enter credit card information or purchase a monitoring product to obtain your reports there.

Because the three reports may contain different information, review all three. Look for:

• Accounts you do not recognize
• Incorrect balances or payment statuses
• Closed accounts reported as open
• Duplicate debts
• Incorrect personal information
• Credit inquiries you did not authorize

Checking your own credit report does not affect your credit scores.

Read more >> How to Read a Credit Report

What to do if your FCRA rights may have been violated

Start by documenting what happened. Keep copies of your credit reports, dispute results, adverse-action notices, letters, emails, and any supporting records.

Depending on the issue, you may be able to:

• Dispute inaccurate information with the credit bureau and furnisher
• Submit a complaint to the Consumer Financial Protection Bureau
• Report identity theft through IdentityTheft.gov
• Contact a consumer-law attorney or legal aid organization

FCRA cases can involve specific deadlines and remedies. If inaccurate reporting has caused serious financial harm or a dispute remains unresolved, consider talking with an attorney who handles consumer-reporting matters.

Bottom line

The FCRA gives you the right to see what consumer reporting agencies maintain about you, dispute inaccurate information, and learn when report information contributes to an unfavorable decision. It also restricts access to your reports and lets you place free security freezes.

Those protections are most useful when you check your reports and act on problems. Review all three reports regularly, save documentation, and dispute information that is inaccurate or incomplete.

Kikoff’s dispute tool can help you generate a letter for disputing credit-report errors. If you also want to add positive payment history, the Kikoff Credit Account reports on-time payments to all three credit bureaus, with no hard credit check to sign up.

Start building a positive credit history with Kikoff.