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Everything You Need to Know About the Fair Credit Reporting Act

Your credit is a critical factor in getting loans, finding housing, and even getting jobs. Organizations often use your credit to determine whether you’re trustworthy with money, which means bad credit can cut you off from many opportunities. Monitoring your credit allows you to ensure that your credit is always accurate, so you don’t lose out on homes, jobs, or loans you deserve.

The federal government agrees that you should be in charge of your own financial history. That’s why the Federal Credit Reporting Act (FCRA) was put in place. Here’s what you need to know about the FCRA, its development, and how it helps you handle your finances.

What Is the Fair Credit Reporting Act?

The Fair Credit Reporting Act is the law that regulates the three major credit reporting agencies (CRAs): Equifax, Experian, and TransUnion. The bill is designed to allow consumers like you to monitor and dispute your history. It also controls how CRAs can collect information, what data they can gather, and when they can share it with others.

The FCRA is invaluable protection for consumers. Under the FCRA, CRAs must:

  • Allow you to access a full copy of your report once per year for free
  • Accept disputes on entries and verify if they’re accurate
  • Remove inaccurate entries from your report
  • Verify that an organization has your consent before releasing your credit information
  • Avoid including any information about your medical history
  • Protect your personal information
  • Allow you to opt out of loan offers
  • Request information about when your information is used against you

In short, the FCRA gives you the right to understand your history, how it’s used, and who can see it.

History of the FCRA

Prior to the 1970s, credit reporting wasn’t standardized in the US. Instead, organizations would decide whether someone was worth loaning money to by requesting statements of character from CRAs.

These statements of character often included irrelevant details like someone’s personality, health, and daily habits, which often led to biased decisions by creditors. In this system, people were often exposed to racial and religious bias and had no way to dispute errors in their reports.

That’s why Congress passed the FCRA in 1970. The bill was specifically aimed at CRAs to make the credit process more transparent. When discussing and refining the bill, lawmakers discussed the problems that would be caused by “secret” databases that could be used to make decisions about a person’s life. The FCRA was the solution, giving people the right to see their reports and dispute inaccuracies.

The FCRA stood unaltered until 2003 when the Fair and Accurate Credit Transactions Act (FACTA) was passed. FACTA amended the FCRA to specifically permit people free access to their reports. Previously, CRAs had to give people access to their reports, but they were allowed to charge for the privilege.

This made it difficult for lower-income people to see their reports. Since lower-income people are typically most vulnerable to inaccurate reports, this was explicitly unfair. After FACTA was passed, the CRAs worked with the federal government to set up, where everyone can access copies of their reports from all three CRAs for free once every twelve months.

How the FCRA Helps You

The FCRA protects your rights to view your reports, but that’s not the only benefit. Here’s how you can use the FCRA to protect you and make the most of the opportunities you should have access to.

Protecting Your Credit

The FCRA specifically requires CRAs to protect your finances by maintaining accurate records. They need to verify that the information they receive is sent by your actual creditors. If they learn they have inaccurate data, they must remove that information from your report entirely. They also need to remove negative information after a set period so your credit can recover from past mistakes.

  • Most negative information, such as missed payments, must be removed seven years after “first delinquency,” or the first time they were reported
  • Bankruptcies must be removed after ten years from the filing
  • Tax liens must be cleared seven years after the taxes were paid in full

These rules prevent simple mistakes from damaging your finances for your entire life. They also protect you from having your report harmed by malicious creditors or identity theft.

Putting Control in Your Hands

Sometimes, CRAs still fail to do their due diligence, and false information ends up on your credit report. According to a report by the Federal Trade Commission, nearly a quarter of all people who checked their reports found inaccurate data. Inaccurate data is more likely than not to hurt your score, which is why the FCRA’s dispute regulations are so important.

If you find inaccurate data on your report, you can make a report to the CRA. The CRA is obligated to investigate your claim and remove the entry if it determines it to be inaccurate. However, inaccurate data can reappear on your report if the CRA believes it’s accurate or if the data is reported again by a creditor.

In that case, you have the right to take legal action. You can work with a qualified credit error attorney to put pressure on the CRA. Legal representation demonstrates that you’re serious about your dispute. It also gives you an ally who can pursue dishonest creditors or negligent CRAs on your behalf.

Make the Most of Your Rights Under the FCRA

The FCRA is a critical consumer rights bill in the US. It lets you retain control over your personal information and hold CRAs accountable for how they use your data. More importantly, it allows you to dispute false information, so you’re not harmed by inaccurate reports.

If you think your report is inaccurate and the CRA won’t fix it, you also have the right to legal help. The credit error lawyers at the Law Offices of Todd M. Friedman, PC can fight these errors and reclaim your credit. Get in touch today to learn how our team can help you fight back against these errors.

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