Definition
The Fair Credit Reporting Act (FCRA) is a federal law enacted in 1970, intended to ensure accuracy, fairness, and privacy in the information utilized by consumer reporting agencies. It primarily aims to protect consumers from willfully or negligently incorrect information on their credit reports.
Key provisions of the FCRA include:
- Right to Access: Consumers can know what information is in their credit report.
- Right to Notification: If information in a credit report has been used against a consumer (e.g., denial of credit), the consumer must be notified.
- Right to Dispute: Consumers can dispute incomplete or inaccurate information.
- Right to Correct: Credit reporting agencies must correct or delete any inaccurate, incomplete, or unverifiable information.
- Limits on Transaction-based Reporting: Restrictions exist on how long certain negative information can remain on a credit report (typically 7 years for most items; 10 years for bankruptcies).
Examples
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Corrective Action Example: Abel wishes to purchase property from Baker under an installment land contract. Baker refuses to make the contract because of Abel’s poor credit rating. Under the Fair Credit Reporting Act, Abel can demand disclosure of Baker’s source of information. Abel can check his credit report, dispute any inaccuracies, and work towards rectifying his credit standing.
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Error Dispute Example: Jane applied for a loan but was denied based on her credit report showing she had defaulted on a previous loan. Jane, aware of her rights under the FCRA, requests her credit report, identifies the error, and contacts the credit reporting agency to dispute and correct it.
Frequently Asked Questions
Q: How can I obtain a copy of my credit report? A: You can request a free copy of your credit report once every 12 months from each of the three major credit reporting agencies (Equifax, Experian, TransUnion) via AnnualCreditReport.com.
Q: What should I do if I find an error on my credit report? A: Notify the credit reporting agency and the information provider (e.g., the entity that provided the data) in writing. The FCRA requires the agency to investigate your claims usually within 30 days.
Q: How long can negative information stay on my credit report? A: Generally, negative information (like late payments) can remain on your report for seven years, while bankruptcies can stay for up to ten years.
Q: Can I sue for FCRA violations? A: Yes, you can sue credit reporting agencies, users of consumer reports, and providers of information for damages in certain circumstances, including willful and negligent noncompliance.
Related Terms
- Credit Reporting Agency (CRA): Companies that collect and maintain individual credit information and sell it to businesses for a fee, enabling them to make lending decisions.
- Credit History: A record of a borrower’s responsible repayment of debts.
- Dispute Resolution: A process allowing consumers to question and challenge inaccuracies in their credit reports.
- Consumer Reporting Agency: Similar to a CRA, these agencies gather and compile information about consumers’ credit behavior.
- Negative Item: Any adverse information on credit reports such as late payments, charge-offs, or bankruptcies.
Online Resources
References
- U.S. Code § 1681 – Fair Credit Reporting Act.
- Federal Trade Commission (FTC).
Suggested Books
- “Guide to Understanding Credit Reports and Credit Scores” by Expert Publishers
- “Credit Repair Kit” by Robin Leonard
- “The Complete Credit Repair Kit” by Arnold S. Goldstein, PhD.
