What is the Fair Credit Reporting Act (FCRA)?
The Fair Credit Reporting Act (FCRA) is a federal law that regulates the collection of consumer credit information and access to their credit reports. It was adopted in 1970 to deal with the fairness, accuracy and confidentiality of personal information contained in the records of credit reporting agencies.
What is a credit score?
How the Fair Credit Reporting Act (FCRA) works
The Fair Credit Reporting Act is the main federal law that governs the collection and reporting of consumer credit information. Its rules govern how a consumer’s credit information is obtained, how long it is kept, and how it is shared with others, including the consumers themselves.
Key points to remember
- The Fair Credit Reporting Act (FCRA) governs how credit bureaus can collect and share information about individual consumers.
- Businesses check credit reports for many purposes, such as making a loan or selling insurance to a consumer.
- FCRA also gives consumers certain rights, including free access to their own credit reports.
The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) are the two federal agencies responsible for overseeing and enforcing the provisions of the law. Many states also have their own laws regarding credit reporting. The entire act can be found in U.S. Code 15, section 1681.
The three main credit bureaus – Equifax, Experian and TransUnion – as well as other more specialized companies collect and sell information on the financial history of individual consumers. The information in their reports is also used to calculate consumers’ credit scores, which can affect, for example, the interest rate they will have to pay to borrow money.
The Fair Credit Reporting Act describes the type of data that offices are authorized to collect. This includes the payment history of the person’s bills, previous loans and current debts. It can also include employment information, current and previous addresses, if they have already filed for bankruptcy or owe child support, and any arrest records.
FCRA also limits who is allowed to see a credit report and under what circumstances. For example, lenders can request a report when someone requests a mortgage, car loan, or other type of credit. Insurance companies can also view consumer credit reports when requesting a policy. The government can apply for it in response to a court order or subpoena to appear before a federal grand jury, or if the person requests certain types of government-issued licenses. In some cases, but not all, consumers must have initiated a transaction or accepted in writing before the credit bureau can publish their report. For example, employers can request a job seeker’s credit report, but only with the requester’s permission.
The Fair Credit Reporting Act limits who can see a consumer’s credit report and for what purposes.
Consumer rights under the Fair Credit Reporting Act (FCRA)
Consumers also have the right to view their own credit reports. By law, they are entitled to a free credit report every 12 months from each of the three main offices. They can request their reports from the official government-authorized site, AnnualCreditReport.com. Under the FCRA, consumers also have the right to:
- Check the accuracy of their report when required for employment purposes.
- Receive notification if information from their file has been used against them when requesting credit or other transactions.
- Challenge – and ask the office to correct – information contained in its report that is incomplete or inaccurate.
- Delete obsolete and negative information (after seven years in most cases, 10 in bankruptcy).
If the credit bureau does not respond to its request satisfactorily, a consumer can lodge a complaint with the Federal Bureau for Financial Protection of Consumers.