Your Rights Under the Fair Credit Reporting Act

Disclaimer: This article is provided purely for informational purposes and should not be considered professional advice. The author is not a lawyer. Please consult with your attorney before making any important legal decisions.

Anyone who pays attentions to their credit ratings, is at least vaguely familiar with the Fair Credit Reporting Act (FCRA). Originally passed in 1970, this law exists to protect consumers from inaccurate information collected by the Consumer Reporting Agencies (CRA). The law also limits on the amount of time that negative information can remain on record.

Today, the FCRA matters more than it did in 1970, when computers were still the size of warehouses and files were still kept in old-fashioned file cabinets. Back then, the only time one's credit report would be "pulled" was if they were applying for a mortgage or other large loan, and even then it did not always happen. Nowadays, one or more of the agencies will provide information any time anyone conducts almost any kind of business. If someone borrowings money for a car, applies for health insurance, or forms a legal partnership, their credit reports will be pulled. It is critical to make sure that your reports paint a good picture.

Most financially responsible people know that they are entitled to one free credit report per year from each of the agencies. Amazingly, few actually take advantage of this right. Obtain a report for free by calling each of the agencies or through the Internet. Checking one's own credit will not hurt an individual's credit scores. Depending on the situation, it may even be prudent to check reports weekly or monthly.

The Fair Credit Reporting Act was amended in 2003 with the passage of the Fair and Accurate Transactions Act (FACTA). Aside from the free credit report provision, changes involving the dispute process were made. Consumers can challenge negative and inaccurate information by contacting the agencies. Doing this in writing is a good idea, and make sure to include copies (not originals) of any documents that support your case. It is also necessary to notify the entity that provided the disputed information to the CRA of the error.

A 2004 study found that errors exist in one out of four credit reports. These mistakes can become extremely costly over time. Find them and dispute them quickly. A mistake discovered a week or two after it appears is much easier to correct than one that goes unnoticed for a year or more.

The three main credit bureaus collect information independently of each other. It is critical to monitor all of them.

When is the last time you checked? Get more information about credit reports from all three bureaus.