Quick Guide to the Fair Credit Reporting Act

The more you know about credit reporting laws, the better for your credit reports and scores. But while the Fair Credit Reporting Act isn’t as intimidating of a read as it might sound, it is 100 pages long. If you want to delve in, this quick guide is a great primer. But if you just want to get the basics down, this quick guide is all you need. Either way, you’ll get a good feel for how credit reporting works. Whether you’re trying to repair bad credit — or simply want to make good credit better — this is good information to use in your favor.

About the Fair Credit Reporting Act

Considering how much credit affects our lives, we need laws ensuring its accuracy. That’s the purpose of the Fair Credit Reporting Act (FCRA).

Enacted in October 1970, the FCRA states that this legislation was born out of a need for “accuracy and fairness of credit reporting” and to “insure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy.”

To that end, the FCRA further states:

“It is the purpose of this title to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information in accordance with the requirements of this title.”

Amendments

Numerous amendments have been made to the Fair Credit Reporting Act since it was enacted in 1970:

Consumer Credit Reporting Reform Act of 1996
Section 311 of the Intelligence Authorization for Fiscal Year 1998
Consumer Reporting Employment Clarification Act of 1998
Section 506 of the Gramm-Leach-Bliley Act
Sections 358(g) and 505(c) of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (PATRIOT ACT)
Fair and Accurate Credit Transactions Act of 2003
Financial Services Regulatory Relief Act of 2006
Section 743 (Div. D, Title VII) of the Consolidated Appropriations Act of 2008
Credit and Debit Card Receipt Clarification Act of 2007
Sections 205 and 302 of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009
Consumer Financial Protection Act of 2010
Red Flag Program Clarification Act of 2010

Changes made by these amendments are reflected in the rights outlined in this guide.

Major Rights Afforded By the FCRA

You have the right to see your consumer reports and credit scores

Consumer Reports

Most of the time, the consumer reports we’re concerned with are credit reports from the big three national credit bureaus – TransUnion, Experian, and Equifax. But there are actually dozens of consumer reporting agencies collecting and sharing information about you. Fortunately, the Fair Credit Reporting Act says you have the right to see all of it, giving you an opportunity to catch mistakes.

Here’s how it works.

Free Annual Consumer Reports

Every 12 months, you can request a free copy of your reports from consumer reporting agencies:

For credit reports from the big three national bureaus, go to com. From there you can request your reports from TransUnion, Experian, and Equifax. You can request them all at once or stagger them throughout the year.
For other consumer reports, you’ll have to go straight to the source. Here is a list of consumer reporting agencies that the Consumer Financial Protection Bureau (CFPB) recommends you keep an eye on. This list includes contact information you can use to request your consumer reports once a year.

Other Ways to See Credit Reports for Free

In addition to your annual credit report, you can see your credit reports from TransUnion, Experian, and Equifax for free if you:

Dispute a credit report listing that is subsequently corrected
Have reason to believe a credit report is inaccurate due to fraud
Receive an adverse action notice from a creditor
Receive a risk-based pricing notice from a creditor
Are unemployed and looking for work
Are on public welfare assistance

Beyond that, you can see your credit reports for free through credit monitoring subscription sites. We recommend Credit Karma to see your TransUnion and Equifax credit reports, and Experian CreditWorks Basic to see your Experian credit report.

Learn more about credit reports: 11 things simply explained.

Credit Scores

As with consumer reports, the FCRA says you have the right to see your credit scores. Unfortunately, this right does not stipulate that you can see your credit scores for free. That’s not say, though, that you can’t find them for free. Here’s how.

The same credit monitoring sites that provide free credit reports also provide free credit scores:

Free TransUnion and Equifax VantageScores through Credit Karma
Free Experian VantageScore through Credit.com*
Free FICO Score through Discover Credit Scorecard (or your own credit card issuer)*

*UPDATE: Credit.com and Discover Scorecard services will not work when you have a credit freeze in place, a recommended safety guard in the wake of the Equifax hack.

That said, there are circumstances when it’s a good idea to pay for credit scores.

If you’re planning to buy a home or car, it’s a good idea to take a look at industry-specific FICO Scores used by mortgage and auto lenders. In that case, go straight to the source at myFICO.com. You have several options, but we recommend the FICO Score 3-Bureau Report (one-time access) or FICO Ultimate (monthly access to the same information).

Data furnishers must ensure accuracy of reported information

Any company or individual that reports information about you to a consumer reporting agency is a data furnisher (e.g., banks, credit card issuers, mortgage lenders, auto lenders, student loan services, landlords, collection agencies).

This is a big responsibility that, thanks to the FCRA, comes with protections.

Data furnishers are prohibited from:

Reporting information they know to be inaccurate
Reporting information after it has been disputed and proven inaccurate

And if mistakes are proven, data furnishers are required to update consumer reporting agencies with corrections.

You have the right to dispute consumer report errors

Building credit can be challenging enough under the best of circumstances. The last thing you need on your credit reports are mistakes dragging down your creditworthiness. Thanks to the Fair Credit Reporting Act, you have the right to dispute anything on your credit reports (or other consumer reports) that you believe to be in error.

Each of the big three credit bureaus has online dispute options. While that may be the simplest method, we recommend creating a paper trail by sending your disputes via regular certified mail with return receipt requested. Here’s a sample letter requesting removal of inaccurate information.

You may also dispute directly with data furnishers.

Learn more about credit disputes.

Consumer reporting agencies must investigate disputes and correct inaccuracies

Once they receive a dispute from you, the consumer reporting agency must conduct a “reasonable investigation.” Here’s how each of the big three credit bureaus describes this process:

In general, though, the process is the same among all three.

They contact the data furnisher for verification of the inaccurate information. If the data furnisher verifies the information, nothing is changed. If the data furnisher does not verify the listing, it must be corrected or removed from your consumer reports. And all of this should be done within 30 days of receipt of your dispute (45 if you sent supporting documentation separately from your initial dispute).

Not just anyone can see your consumer reports

The consumer reporting agencies are only authorized to share your reports with those who have permissible purpose:

Lenders you’ve applied to for credit, including credit card companies, auto finance companies, mortgage lenders, student loan lenders, and the like
Landlords you’ve submitted applications to
Insurance companies you’ve submitted applications to
Utility companies you’ve applied to set up accounts with
Government agencies you’ve applied to for assistance
Collection agencies attempting to collect debts from you
Employers or potential employers, to whom you’ve given consent
Court order or subpoena
Child support enforcement agencies
Anyone who you give written consent to see your reports
Services you’ve given permission to monitor your credit for you

Learn more about permissible purpose.

You must be notified if something in consumer reports results in adverse action

An adverse action is a negative decision made based on information in your consumer reports, like:

Being turned down for credit, insurance, or employment
Being approved for credit or insurance, but under less favorable terms (because of your credit)
Having less favorable changes made to existing credit or insurance

Should a creditor, insurance company, or employer take any of these adverse actions against you – based on information in your consumer reports – they must:

Notify you that adverse action was taken based on information in your report
Provide to you any credit score that was used in making the decision
Provide to you the name, address, and phone number of the consumer reporting agency that provided the report
Notify you of your right to request a free copy of that report and to dispute any inaccuracies

Note, to receive your free report, you must make the request within 60 days of the adverse action notice.

You can opt-out of prescreened offers

Considering permissible purpose, you might be wondering how you receive prescreened offers from creditors and insurance companies that you didn’t apply to and, consequently, aren’t able to see your credit reports. Here’s how.

The credit bureaus use the information in your credit reports to determine whether you meet certain criteria that creditors or insurance companies are looking for in consumers. If you meet the criteria, you go on the list that gets provided to the creditor or insurance company, and you get an offer.

Thanks to the Fair Credit Reporting Act, you can stop these offers.

If you’d rather not be included in these lists – and don’t want to receive prescreened offers – you can ask to be removed from the lists of all three credit bureaus by calling toll-free 1-888-567-8688. And creditors are required to notify you of this option in every prescreened offer they send you.

Should you opt out?

It depends.

When you’re shopping around for credit or insurance, prescreened offers can be helpful educational tools, letting you know the kind of terms you might qualify for so you can make choices and negotiate accordingly.

Plus, the FTC says “Because you are pre-selected to receive the offer, you can be turned down only under limited circumstances. The terms of prescreened offers also may be more favorable than those that are available to the general public. In fact, some credit card or insurance products may be available only through prescreened offers.”

Finally, prescreened offers have zero impact on your credit score.

On the other hand, prescreened offers mean a lot of junk mail – junk mail with personal information that should be shredded, not just thrown in the trash. Also, opting out won’t stop all unsolicited offers from credit card and insurance companies, only those falling into the prescreened category.

The good news is, you can always change your mind. The same number you call to opt-out is of prescreened offers is the same number you call to opt back in.

Negative information can only stay on your consumer reports for so long

As outlined in our Guide to Credit Reports, most negative information must be removed from your reports after 7 to 10 years:

2 years for credit inquiries (though hard inquiries only affect your credit score up to 12 months and soft inquiries not at all)
7 years for:
- Late payments
- Charge-offs
- Collection accounts (plus 180 days)
- Foreclosures
- Judgments (with exceptions)
- Paid tax liens (if unpaid they can stay on indefinitely)
10 years for bankruptcies

Should you see that a negative item’s inclusion on your reports exceeds the above time limits, submit a credit dispute to the appropriate credit bureau(s).

You have the right to place fraud alerts on your consumer reports

If you have reason to believe you have been a victim of identity theft, you have the right to ask that a fraud alert be placed on your consumer reports:

Initial fraud alert that lasts 90 days, which you can renew indefinitely
Extended fraud alert that lasts 7 years
Active duty military alert that lasts 1 year

Fraud alerts won’t prevent you from getting credit, but they will require potential creditors to contact you for verification first.

Other Rights Covered In the FCRA

The Fair Credit Reporting Act also outlines your rights relative to:

Affiliate sharing
Relation to State laws
Disclosures to FBI for counterintelligence purposes
Disclosures to governmental agencies for counterterrorism purposes
Disposal of records
And more

FCRA Enforcement

The Fair Credit Reporting Act is enforced by the FTC and the CFPB. So, if you believe your rights have been violated, you may submit a complaint to one or both of these agencies. The FCRA also affords you the right to sue violators.

To learn more about your rights, see the Fair Credit Reporting Act in its entirety. You may also want to check out the FTC’s Summary of Your Rights.