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The Fair Credit Reporting Act lays the groundwork for people to work on their credit, resolve errors, and improve their scores. In 2015, the Federal Trade Commission released a study that showed 23% of people had found inaccurate information on their credit reports. This information can be something benign like a misspelled address or something more serious like a duplicate account in default. Without the Fair Credit Reporting Act, there would be no way for consumers to improve their scores with credit repair.
The Fair Credit Reporting Act gives consumers the power to see what’s inside their report and to dispute items that are inaccurate. It also requires credit bureaus and other businesses to respond to disputes in a timely manner. Many things affect your credit score and without the Fair Credit Reporting Act, you wouldn’t have the chance to improve it.
Before the Fair Credit Reporting Act
Before the Fair Credit Reporting Act, credit reports were only shared between businesses. You couldn’t even see what was on your report. How was anyone supposed to work on their score and get to a better state with their credit? In those days, credit was subjectively determined by factors like character, home visits, and word-of-mouth.
There was no centralized system that reported on people’s payment history before the Fair Credit Reporting Act. When someone wanted to borrow money, the lender would often go to their home to see how well-to-do they were, or talk to their friends, or ask their other creditors if this person made payments on time. That’s the problem the Fair Credit Reporting Act solved in 1970.
The Fair Credit Reporting Act and your credit score
The reporting model that would become FICO started in 1950, but it wasn’t fine-tuned for a few more years. With the Fair Credit Reporting Act of 1970, there was finally a system based on real data that could determine credit. It created a system that regulated what information was to be collected, what would be reported on credit reports and for how long, and how people could get copies of their report.
The Fair Credit Reporting Act gives people power over their own score and lets them make improvements on their score. It takes time and work, but thanks to this law, it’s possible to improve your score. Some of the rules the Fair Credit Reporting Act enforces include:
- You can view your credit report
- You can access your report for free once a year
- You can view your credit score according to the Fair Credit Reporting Act
- You have the right to dispute information
- Agencies are required to resolve disputes and delete errors in a timely fashion
- You can see who’s accessed your report
- You have to be notified if you’ve been denied for something based on your report
- You can reject pre-screened offers based on your report
- You can sue companies who don’t comply with the FCRA dispute rules
The Fair Credit Reporting Act regulates over 50 credit reporting agencies
Most people have heard of the three main credit reporting agencies: Equifax, Experian, and Transunion. But did you know there are over 50 agencies that collect and report consumer credit information? These are all regulated by the Fair Credit Reporting Act. Many of these other agencies deal with specialized fields. For example, Experian RentBureau, Screening Reports, Inc., and Tenant Data Services all deal with tenant screening. Landlords and property managers may work with one of these agencies instead of the big three.
PeopleFacts, Truework, and IntelliCorp provide background screening services for employment. The Fair Credit Reporting Act applies to all of these agencies, too. If an adverse decision is made on your behalf, they are required to let you know the reason and give you a copy of your report for free. They may not give your report automatically, but you can request it.
If there hasn’t been any adverse action based on your credit report, each of these companies still has to give you your report, they may just charge a fee. Under the Fair Credit Reporting Act, the maximum allowable fee in 2019 is $12.50. If you have recently been denied housing or employment based on your credit report, make sure to get a copy of the one that was used to deny you. It’s possible that errors and old negative items can stay on one report while not on another. The Fair Credit Reporting Act was created to help you delete those items.
Opt out of pre-screened offers to resist temptation
Is your mailbox crammed with pre-screened credit or personal loan offers? You can thank your credit report for that. Reporting agencies don’t just keep your records for fun. The Fair Credit Reporting Act allows them to make lists of people based on certain criteria and sell those lists to other businesses. For example, a credit card business may purchase a list of all people with scores between 580 and 650. With that information, they prepare a “pre-screened” credit card offer and send that to everyone on the list. Of course, they haven’t personally screened your whole file. But the offer can typically be easier to get since they know what your score is.
If you’re trying to rebuild your credit, it’s important to have the right credit mix. With that said, you should be careful of taking on extra debt when you’re rebuilding. Certain cards can come with terms that make it very hard to stay out of debt. Fees and interest rates can snowball and take your score backward. The good news is that the Fair Credit Reporting Act lets you opt-out of receiving pre-screened offers. It sort of like opting out of telemarketing calls. Most of the pre-screened offers aren’t very helpful to your score, anyway, so you won’t be missing much. To opt out, you can go to OptOutPrescreen.com. You can always opt back in at a later date.
Check your report for free once a year under the Fair Credit Reporting Act
The Fair Credit Reporting Act requires all credit reporting agencies to give consumers a copy of their report for free once a year. This requirement began in 2003. You can obtain your free credit report at AnnualCreditReport.com—this is the only source to get your Experian, Equifax, and Transunion reports for free. There are also other credit reporting agencies, and some of them offer yearly reports for free. The Consumer Financial Protection Bureau’s List of Consumer Reporting Companies shows which ones do and how to contact them.
Under the Fair Credit Reporting Act, You can also get a free report in a few other situations, as well. If you’re unemployed and planning on looking for a job soon, you can get a free report. Also, if you receive welfare assistance or have been an identity theft victim, you can get a free report.
The Fair Credit Reporting Act requires old negative items to be deleted
The Fair Credit Reporting Act outlines rules for when items are required to be deleted off your account. Most negative information is required to be deleted after seven years. Some items, like bankruptcy, can stay on your report for ten years. Even though it seems like a long time, there is a limit. That’s much better than having a bankruptcy follow you for the rest of your
life. If you find that a negative item has been on your account past the limit, you can dispute that with the agency and get it removed. They are required to remove it in 30 to 45 days. If they don’t, you have the right to sue them and win damages.
The Fair Credit Reporting Act gives ground for disputes
The Fair Credit Reporting Act gives consumers a roadmap to follow when disputing items on their credit report. Even one negative item that shouldn’t be there can affect your score. It’s not uncommon for you to improve your score by 50 points if you’ve never disputed anything before and you have errors in your report.
Before 2010, you were only permitted to dispute errors with the credit bureaus. Since then, you’re also able to dispute errors with the companies that report your actions to the credit bureaus, also known as furnishers. For example, let’s say your Experian credit report says that your Chase Bank credit card is in default even though you paid it off three months ago. Under the Fair Credit Reporting Act, you have the option of either going to Experian and disputing the item or going to Chase Bank and disputing it.
Both companies are required to resolve it in a timely manner under the Fair Credit Reporting Act, but there is a difference. Most credit reporting companies communicate with furnishing companies via number codes. They send the code off and ask to have it verified. In this case, the code and message would say, “Is account XYZ in default?”
There are codes for most credit situations, but not all. If you’re in a unique situation, it may be better to contact the furnisher first instead of the credit bureau. Once you file a dispute with them, the Fair Credit Reporting Act requires them to act on it and report the change to the credit bureau.
The Fair Credit Reporting Act requires disputes to be resolved in a timely manner
Once you’ve filed your dispute, the business or reporting agency is required to investigate it. They can’t just sit on it for six months. The Fair Credit Reporting Act requires they investigate and respond within 30 days of receiving your dispute. If you supply them with more information during that time, they have up to 45 days from the start to resolve the dispute.
Make sure to include any evidence like copies of bills and the exact date and account number for the account in question. The bureaus and other businesses have the right to deem your dispute frivolous if it doesn’t include enough information. If they think it’s frivolous, they have to respond and tell you within five days according to the Fair Credit Reporting Act.
If you file a dispute with a credit bureau and they accept your dispute, they have five days to forward your claim to the furnisher—the business who holds your account. The furnisher has to verify the claim and make a change if one is required, and then report that to the credit bureau.
If you file a dispute with the furnisher (bank, credit card company, etc.), they are required to do their own investigation. If they accept your claim, they have to make the change to your account and let all three credit bureaus know. This aspect of the Fair Credit Reporting Act is what really helps your score recover. It holds credit bureaus and businesses accountable to resolve disputes quickly.
The Fair Credit Reporting Act allows you to freeze your credit report
If you’ve been a victim of identity theft, or suspect you are at risk, temporarily freezing your credit report may be an option. The Fair Credit Reporting Act allows consumers to freeze their accounts and a recent law change allows this to be free. A credit freeze makes it harder for thieves to open accounts in your name. The downside is that you need to lift the freeze to start a new account or apply for anything that needs your credit report.
A freeze can be placed in as little as one day if you request it over the phone or online, and a freeze lift takes effect within one hour of the request. The Fair Credit Reporting Act makes it easy to request a freeze on your credit file. To request one, contact each of the three main credit bureaus: Equifax, Experian, and Transunion. Lifting a freeze requires a password-protected account or a PIN. A freeze is different than a lock. A lock may come with monthly fees and is not regulated by the Fair Credit Reporting Act. Credit locks are also easier to take off when you want to do something with your credit file.
The Fair Credit Reporting Act is the basis for credit repair
Without the Fair Credit Reporting Act, you wouldn’t be able to clean out errors and old negative items from your credit report. That’s a big part of credit repair. The Fair Credit Reporting Act also allows you to authorize a company to file disputes on your behalf. It can be time-consuming to file these disputes yourself. If you choose, you can work with a credit repair company that will stay on top of the disputes and do a thorough check of your report.
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