Facebook Email icon An envelope. It indicates the ability to send an email.
Email Twitter icon A stylized bird with an open mouth, tweeting.
Twitter LinkedIn icon
LinkedIn Link icon An image of a chain link. It symobilizes a website link url.
Copy Link lighning bolt icon An icon in the shape of a lightning bolt.
Save Article Icon A bookmarkAffiliate links for the products on this page are from partners that compensate us and terms apply to offers listed (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate credit score services to help you make smart decisions with your money.
When you borrow money from a bank, the lender reports that transaction to the three major credit bureaus — Experian, Equifax, and TransUnion. These publicly traded, for-profit companies compile your credit history onto a credit report, down to the monthly balances on your credit card. These credit reports are used to calculate your credit scores, which play a big role in the the interest rates you pay on borrowed money, credit cards you qualify for, and whether you can rent an apartment.
This entire process happens regardless of how the consumer feels about it. However, the powers that be are reined in by the Fair Credit Reporting Act (FCRA), which lays out rules that the credit bureaus have to follow and rights that their consumers are entitled to. These rules include the type of information the bureaus are allowed to collect and who they can sell it to.
Here's everything you need to know about the Fair Credit Reporting Act.
The Fair Credit Reporting Act is a federal law that regulates credit bureaus and protects consumers. It was passed in 1970 to address the accuracy, fairness, and privacy issues within the credit industry.
The Federal Trade Commission (FTC) was the sole enforcer of the FCRA until the Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB), which formerly began operations in 2011. The two government agencies now share responsibility for enforcing the FCRA.
The rules that the FCRA establishes cover how a consumer's credit information is collected, how long it is kept, and how it is shared with others from potential employers, landlords, and even the consumers themselves. The FCRA also establishes measures to protect consumers from identity theft.
The FCRA dictates who can see a credit report and under what circumstances. Certain organizations must have what is called a "permissible purpose" for a credit bureau to grant them access to your credit report. Permissible purpose usually covers credit, insurance, rental applications, or employment. For example, potential lenders may request a credit report when someone applies for a line of credit. An employer can request an applicant's credit report, but only with the applicant's permission.
Consumers have designated rights under the FCRA. You, the consumer, do not have the right to opt-out of credit reporting, but you do have the right to make sure that the recorded information is correct. By law, you are entitled to one free credit report every year from all credit bureaus, including Innovis, the fourth credit bureau.
That said the major three credit bureaus now offer free credit reports every seven days. You can request these credit reports at AnnualCreditReport.com.
Under the FCRA, consumers also have a right to:
If a consumer files a request to the credit bureau and the credit bureau fails to respond, the consumer can file a complaint with the CFPB.
Under the FCRA consumers are entitled to a free credit report every 12 months from each of the three credit bureaus, but there are other situations in which a consumer can get access to their credit report under the FCRA:
A consumer decides to purchase a home and applies for a mortgage and the bank denies their application, stating that the consumer's credit score isn't high enough to buy a house. Under the FCRA, the creditor must notify the consumer of the rejection, which is called an adverse action notice, within a reasonable time. The notice needs to include which credit bureau provided the information to the lender along with the contact information for this bureau.
If the bank pulled their report from Experian, the consumer can now request a copy of their Experian credit report to see if the information contained therein supports the lender's decision. The credit report must be requested within 60 days of receiving the adverse action notice.
The FCRA requires that a lender, employer, landlord, or anyone else seeking a consumer's credit report have a legally permissible reason for doing so. The FCRA also requires that credit reporting agencies must remove negative credit information after seven years and bankruptcies (depending on what type) after 10 years. If this negative information is still on your credit reports after they've reached those time periods, you can dispute these items.
If a credit bureau breaks a rule outlined in the FCRA, it can hurt your credit scores and have a serious, negative impact on your financial life. Being able to access credit and money when you need it is crucial and that is largely determined by what is in your credit report.
Credit can play a role in every aspect of your life and the higher the credit score the better. Protecting your credit and knowing your rights as they pe to credit reporting is important.
What is a violation of the FCRA? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
Per the FCRA, credit bureaus must remove outdated information from your credit report. Credit delinquencies and Chapter 13 bankruptcies must be removed from your credit report after seven years, and Chapter 7 bankruptcies must be removed after 10 years.
Does the FCRA protect me from discrimination? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
The FCRA can be a helpful tool for detecting credit discrimination, compelling creditors to give the exact reason for denying your credit application. However, the FRCA doesn't explicitly prevent creditors from discriminating against you. That responsibility falls under the Equal Credit Opportunity Act.
How do I limit prescreened offers? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
The FCRA allows consumers to opt out of prescreened offers from creditors and insurance providers. You can opt out by going to OptOutPrescreen.com or calling 1-888-5-OPT-OUT (1-888-567-8688).
