Knowing how the credit system works and what your basic legal rights are may save you a tremendous amount of time and money and make you a more powerful consumer. The importance of a strong credit profile cannot be overstated.
How The Credit Bureaus Work
Collecting and reporting credit histories is a multi-billion dollar business. The national credit reporting agencies, (a/k/a credit bureaus) - Transunion, Experian, Equifax and Innovis, collect, maintain, modify and update information on over 800 million people worldwide. They then sell this information, along with your credit rating score, to organizations such as mortgage companies, retailers, banks, insurance companies and even employers.
Other information gathered may include your mortgage payment records and public records such as court judgments, tax liens, foreclosures and bankruptcies. They do not include your income or monthly rent payments, utilities or doctor bills.
Virtually every time you fill out a credit application, apply for a loan, various types of insurance or even fill out an application for employment, your credit history as a consumer for the last seven years is sold to that organization. Despite the obvious privacy issues involved with this type of reporting, our government has deemed this process to be necessary and legal.
However, our government has enacted laws to assist consumers and prevent creditors, debt collectors and credit reporting agencies from using unfair reporting practices and undertaking other abuses.
The Fair Credit Reporting Act
The Fair Credit reporting Act, (FCRA), regulates how your credit history is kept, used and shared by creditors, credit reporting agencies and other organizations. It was established by the Federal Trade Commission to promote accuracy and ensure privacy in the use of credit reports. Unfortunately, the FCRA does not provide for the review and policing of 800 million credit reports, so each individual consumer is responsible for the accuracy of his or her own report. Even more sobering is the fact that mistakes in your credit report are relatively common. It may be a minor error or lag in reporting, but you will never know until you order your credit report.
You should order a copy of your credit report annually to review the report for accuracy and timeliness. A mistake in your report could lower your credit rating and prevent you from being approved for credit or cost you money in increased interest. This is where credit repair comes in and may assist you in correcting derogatory or inaccurate accounts. Under the FCRA, you have a multitude of rights and knowing the basic ones is important. The main "right" you have is your ability to "dispute" any account on your credit report. (See below). As a consumer you must learn the rules for credit repair and ensure that you aren't taken advantage of by credit reporting agencies and creditors, (known as "furnishers" in the language of the FCRA). If you don't learn the rules or you are not comfortable taking action, hire a lawyer or reputable credit repair professional to help you.
How To Check Your Credit
These days you can easily obtain free credit reports. I advise my clients to get their report from www.annualcreditreport.com. Or you can call toll free 1-877-322-8228. However, many other web sites provide a free report including creditkarma.com and freescoreonline.com. Generally must pay to get your credit score, however even the score is now available for free. One option is freescoreonline.com, but expect to provide them with extensive personal information to obtain the free score. Also, keep an eye out for the up sell. You will be solicited to purchase other services that you probably do not need.
Also, at your request, any credit reporting agency, (e.g. Equifax, Experian, Transunion, Innovis), must provide you with the information in your file as well as a list of everyone who has requested it. There is no charge for the report if a person has taken adverse action against you, (denied you credit), because of information supplied by the credit reporting agency, as long as you request the report within 60 days of receiving notice of the action.
Your Rights Under The FCRA
The FCRA requires users of your credit report to advise you if information in your file has been used against you. Any creditor or employer who uses information from a credit reporting agency to take action against you, (e.g. denying you credit, insurance or a job), is required to notify you in writing and provide you with the name, address, and phone number of the credit reporting agency that provided the consumer report.
Most importantly, the FCRA empowers you to dispute inaccurate information with the credit reporting agencies. This right is the foundation of the massive credit repair business in the United States, and forces both credit reporting agencies and creditors to investigate your dispute. (The dispute process is explained in another article on my website: www.myfaircreditsite.com). If you advise a credit reporting agency that your file contains inaccurate information, they are required to "reinvestigate" your dispute by performing a "reasonable investigation" including review of all information you provided to the credit reporting agency. This process generally requires the investigation to take 30 days. However, if your dispute is deemed to be "frivolous," the Credit reporting may ignore your dispute.
If the credit reporting agency's investigation does not resolve the dispute, you may add a brief statement, up to 100 words, to your file. The credit reporting agency must include a summary of your statement in your reports. If an item is deleted or a dispute statement is filed, you have a right to demand that anyone who has recently received your report be notified of the change.
A credit reporting agency must remove or correct inaccurate information from its files after you dispute it. You may file suit and recover damages if they fail to do so. However, the credit reporting agency is not required to remove accurate information from your file unless it is outdated or cannot be verified.
If you tell anyone, such as a creditor who reports to a credit reporting agency, that you dispute an item, they may not then report the information to a credit reporting agency without including a notice of your dispute. Once you've notified the source of the error in writing, it may not continue to report the information if it is not accurate.
How Will Your Credit Report Affect You?
How long do accounts stay on your credit report? Who sees your credit report? Can you control who has access to your credit report? These are all very good questions.
In most cases, a credit reporting agency may not report negative information that is more than seven years old or ten years for bankruptcies. A credit reporting agency may provide information about you only to people with a need recognized by the credit reporting agency; usually to consider an application with a creditor, insurer, employer, landlord, or other business.
Your consent is required for reports that are provided to employers, or reports that contain medical information. A credit reporting agency may not give out information about you to your employer, or prospective employer, without your written consent. A credit reporting agency may not report medical information about you to creditors, insurers, or employers without your permission.
You may choose to exclude your name from credit reporting agency lists for unsolicited credit and insurance offers. Creditors and insurers may use your credit report without your consent, as the basis for sending you unsolicited offers of credit or insurance. Such offers must include a toll-free phone number for you to call if you want your name and address removed from future lists. (You can "opt out" of solicitations immediately by simply going to each credit bureau website and filling out a form). The opt-out will keep you off the list for two years.
Lawsuits Alleging Violation of the FCRA
You may seek damages from violators by filing a FCRA lawsuit in State or Federal court. If a credit reporting agency, a user or in some cases a creditor fails to fix or delete inaccuracies, and fails to conduct a reasonable investigation, they may have to pay you damages. The actual statutory language is provided in 15 U.S. Code Section 1681n:
(1) (A) any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000; or
(B) in the case of liability of a natural person for obtaining a consumer report under false pretenses or knowingly without a permissible purpose, actual damages sustained by the consumer as a result of the failure or $1,000, whichever is greater;
(2) such amount of punitive damages as the court may allow; and
(3) in the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney's fees as determined by the court.
If you feel that your credit report contains inaccuracies, or that you have been the victim of any violation of the FCRA, you should contact an experience FCRA lawyer in your area. You can find a qualified lawyer at www.naca.net.
In sum, no matter what your credit record is, knowledge your rights under the FCRA will reward you with the power to handle debt collectors, creditors or credit reporting agencies who overstep their bounds.
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