Laws are in place to protect consumers from inaccurate and fraudulent credit reporting. The Fair Credit Reporting Act or FCRA are the laws governing consumer credit files. The FCRA was written to reduce fraud and protect consumer privacy. Areas covered by the Act include: Reporting to credit bureaus, consumer access to records, rental histories, and information collection agencies use like credit bureaus.
The Operation of Credit Agencies: Who is ‘government run’ and who is private?
Credit reporting companies collect data provided by third party companies, who are mostly lenders. The information is compiled and then sold to creditors, organizations, and companies who use the figures to make decisions. Credit reporting companies such as Equifax, Trans Union, and Experian are private companies, subject to government regulation, but not sponsored or run by any government agency.
Credit reports were created to help lenders manage loan risk: Lenders report past borrowing repayment history and share the information through centralized credit reporting so everyone can evaluate consumer risk with common information. The use of credit reports has expanded well beyond lenders and is now used by employers, rental agencies, insurance underwriters, and service companies like utilities and cell phone providers.
As credit reports become an essential part of life, it is also critical to ensure it shows an accurate depiction of how you manage debt.
Obtaining A Free Report
Reviewing your report on a regular basis can identify unauthorized activity, ensure the accuracy of the reported information, and locate errors for dispute.
Consumers are entitled to a free copy of their credit file from each of the three credit bureaus, once every 12 months. They can be viewed all at once or over time. The free reports are limited to once every 12 months, not every year; if you receive a copy on June 1 of 2016, you will be able to get another free copy on June 1 in 2017.
Declined credit or negative consequences based on your file information gives you the right to a free report. Supplying you with a written notice of the adverse action is required. You have the right to dispute any decision based on inaccurate information: You have 60 days from the time of the adverse action to obtain a copy of your credit file.
Fraud or identity theft allows you a free review of your credit file although proof of the fraud through a police report or other record may be required.
Consumers receiving public assistance get a free report.
Unemployment qualifies you for a free report as long as you are seeking employment and apply within 60 days.
When public companies experience a security breach, you gain free access to a report, and the company typically provides free credit monitoring for 12 months. To utilize this benefit, you must respond to the company communication. Free monitoring is industry practice, not a right through the FCRA. EXPLAIN MORE. WHY WOULD SOMEONE GET THEIR CREDIT IF A PUBLIC COMPANY HAD A SECURITY BREACH?
Rights Granted Through the FCRA
Notification. You have the right to notification when denied credit or the terms offered are less favorable.. Companies who use the report in decisions must send you a letter including which bureau provided the data. A copy of the letter qualifies you for a free report within 60 days. If there are inaccuracies that impact your file, you can dispute the decision.
Access to a free report. Once every 12 months you can view a copy of your report, so you are aware of the information used in the decision-making process.
Access to your credit score, although it does not have to be offered free of charge. Scores may be different across bureaus, and lender’s, so the score you receive is not the only score.
Right to an accurate report. The ability to dispute inaccuracies helps ensure an accurate credit file. Typically, companies have 30 days to respond to a dispute involving the accuracy of information.
Removal of outdated or negative information. There are limits to the length of time late payments, delinquencies, and other negative information stays on your file. The type of delinquency determines the time. Credit inquiries drop off after two years. Bankruptcies have the longest reporting time of ten years, where most late payments go away after seven years.
Third parties can only access your file for valid reasons. Not just anyone can pay for a copy of your credit file. In most cases, you must sign a form granting the company permission to view your report. Signing an application often grants that authorization.
The ability to opt out of prescreened offers. Credit companies look for new customers by viewing credit files. You have the right to limit such access by opting out of prescreening offers. You can also block your file which further limits third party access.
Right to sue when companies refuse to remove inaccurate information. Federal agencies have cracked down on inaccurate reporting by lenders in recent years.
The Process for A Dispute
Nearly 80% of credit files contain inaccurate information that can impact your credit score and ability to obtain loans.
Online is a convenient way to view your report. At the bottom of the file, there is a link for disputing inaccuracies. Filing disputes through the mail is also an option, but must be in writing as making phone disputes is unacceptable.
It is a good practice to dispute errors with both the credit bureau and the reporting company. Sending supporting documentation will increase the success rate. Often, simply stating that the information is incorrect is not enough to get a derogative mark removed from the file. It is illegal for any company to list negative information that is inaccurate. However, you have the burden of proof.
After filing a dispute, the credit bureau has 30 days to investigate and make a decision. Notification of the decision, along with an updated copy of your credit file, is required. If the reporting company fails to respond to the dispute, the information is automatically removed. Automation has reduced the non-response rate of reporting companies. Companies also must send supporting documentation to show the information is accurate.
If the dispute does not end to your satisfaction you can place comments on the report. This identifies the disputed item and adds a statement or information you wish to provide. The FTC also investigates complaints.
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