It's not always easy to correct errors on your credit reports.
However, don't give up just yet: You have a decades-old law on your
side that requires credit reporting agencies and data providers to
correct their mistakes -- and help keep your credit information
from getting into the wrong hands.
The Fair Credit Reporting Act was enacted in October
1970, just as consumer credit was exploding -- and so was the power
of the private companies that keep track of consumers' payment
behavior. Credit reporting agencies, once small and local, were
consolidating to create a national credit reporting system, and the
law offered a consumer-friendly counterweight to keep the playing
field even.
"As laws go, the Fair Credit Reporting Act is a pretty strong
one," says Cary Flitter, a consumer lawyer and law professor in
Philadelphia. Per the law, credit reporting companies -- as well as
the data furnishers that give them the information they file -- are
not only required to follow a strict set of guidelines, they are
also required to fix their own mistakes and are legally on the hook
if they fail to do so.
That said, "there are little pitfalls the consumer has to
navigate," says Flitter, so it's important to be your own best
advocate. If you're not quite sure what your rights are when it
comes to your credit information, here are six things you need to
know about the Fair Credit Reporting Act (FCRA) -- and how you can
use it to protect yourself.
1. You have the right to know what's in your credit
reports.
The act requires credit reporting agencies to give you free access
to the information they have collected about you and your financial
habits once every 12 months.
You can access a free copy of each of your generic credit
reports -- which contain information about how you have handled
credit in the past -- from the three biggest credit bureaus
(Experian, Equifax and TransUnion) by writing to them or through
the Web at AnnualCreditReport.com.
You are also entitled to a free annual copy of any specialty
reports that are compiled about you by smaller credit reporting
agencies, such as CoreLogic, LexisNexis and Teletrack. These
agencies keep records of financial data not tied to a loan
-- such as your rental payments, insurance claims or
check-writing history -- and sell them to landlords, banks,
insurance representatives and others considering doing business
with you.
"You hear the terminology Fair Credit Reporting Act and you
think that's an act that only applies to credit reports," says Paul
Stephens, director of privacy and advocacy at Privacy Rights
Clearinghouse. However, "there are these other types of agencies
that exist that are essentially maintaining dossiers of consumers
that go well beyond the traditional concept of credit."
Any credit reporting agency that collects financial information
on you is required to honor your request for a free annual copy of
your credit file. Getting your credit report from a smaller agency
will take a little more work, says Stephens. "Those reports you
must get directly from those companies. There is no central source
to obtain (them)."
Every company has a different policy for responding to requests.
Some companies will require that you mail a request for the report,
others will provide a toll-free number.
2. Only authorized users can see what's in your credit
report.
If you're worried that your boss or potential sweetheart can access
your credit information without your permission, don't sweat it.
The act bars individuals from seeing your credit reports, unless
they can prove that they have a legitimate need to see it.
"There's something that is known as the permissible purpose
doctrine and that basically says that you can't just go to a credit
reporting agency and say, 'I want to take a look at this person's
file,'" says Stephens. "You have to have a reason to look at that
file."
According to the FCRA, a person can access your credit report
only if:
- A court has ordered that the credit information be
shared.
- That person is a lender and you are applying for some form of
credit. A creditor may also pull your report if you currently
have an account open with them or if you have a balance that's
past due.
- The person is working on behalf of an insurance company
that's underwriting your insurance or a government agency that is
considering giving you a license or other public benefit, such as
social services.
- An individual has requested your report for employment
purposes and has obtained your written authorization to view
it.
- A person can prove a legitimate business need to view the
report. For example, if a landlord is considering your rental
application or a person is working on behalf of a retailer and
has accepted a check as a form of payment, he or she can request
a copy of your report.
- You have given clear instructions to the credit reporting
agency to release your information to a particular person.
Authorized state officials or child support enforcement agents
may also access your credit report if they need to verify your
ability to make child support payments or determine how much you
should pay.
Sometimes, however, credit reports do get into the wrong hands.
Flitter recommends you periodically check the section of your
report that lists who's pulled it. "The second-to-last page of your
credit report will list everyone who has looked at your report in
the last two years," he says. If someone pulls your report without
proper authorization, speak up. There are serious penalties for
people who break this section of the law, says Flitter. "It's
actually a felony to obtain someone else's credit report under a
false pretense," he adds.
3. If there is an error on your report, you can do
something about it.
"You have the right to dispute information that is not accurate,"
says Stephens.
The FCRA requires credit reporting agencies to "maintain
reasonable procedures that ensure maximum possible accuracy," says
Flitter, the consumer lawyer. Even so, errors can show up on your
credit report, so it's important to review your files
regularly.
"Get the credit report and look at it," says Flitter. "Examine
it for accuracy to the best of your knowledge."
If you spot an error, "you must notify the credit bureau and it
must conduct an investigation," he says.
The credit bureau has 30 days to look into your dispute, based
on the information you provide to it. The credit reporting agency
must also notify the furnisher of the information, such as a bank
or credit card issuer, within five days of receiving your dispute
and provide the furnisher with the same evidence that you gave when
you flagged the error.
The data furnisher must then investigate your dispute and verify
whether the information it gave to the credit bureau is correct.
"If it's not verified within 30 days, then the credit bureau has to
remove [the disputed error] from the credit report," says
Flitter.
If the credit bureau or data furnisher says it has verified that
the information is correct, however -- even if you're sure that the
information is wrong -- then it can still show up on your report 30
days after you submitted a dispute.
"Unfortunately, many of the companies, including the [big three]
credit bureaus, don't have a very effective mechanism for
disputing" an error, says Stephens. "They spend a very, very small
amount of time investigating."
As a result, some consumers find that even after they have
contested a legitimate error, it still shows up on their reports,
forcing them to send a second dispute. "Right now, dealing with the
credit reporting agencies can be very, very frustrating," Stephens
adds. You'll often need patience and persistence to get an error
off your report.
If, after sending multiple disputes, you feel like you're
getting nowhere, consult a lawyer experienced in these cases, says
Chi Chi Wu, a staff attorney with the National Consumer Law Center.
You are entitled under the Fair Credit Reporting Act to seek legal
action.
You can also help make sure an error gets investigated as
thoroughly as possible by skipping the credit bureau's online
dispute form, which only gives you a small amount of space to
write, and sending a detailed dispute by mail. "Consumers never
should send in their disputes online. Always in writing, [by]
certified mail," says Wu.
"It's also a good idea to write to the furnisher," says Flitter,
the consumer lawyer. Include as much information as possible in
both letters and attach supporting evidence. "When it's on paper,
you control the content," says Flitter, so you can attach whatever
information you need to prove your dispute. "They don't want your
supporting documents, but they have to take them if you send them,"
he says.
Also make sure you stick to one dispute per letter, says
Flitter. If you find multiple errors on your credit report, send a
detailed letter for each.
4. Negative information
on your credit report is subject to a time limit.
You can't dispute accurate negative information. However, you can
make sure that the adverse information in your report is limited to
the time frame set out by the Fair Credit Reporting Act. "The
general rule is if there's something negative on your credit
report, it's supposed to drop off after seven years," says
Stephens. "One exception to that is bankruptcy. Bankruptcy can stay
on your credit reports for 10 years."
Occasionally, debt mistakenly gets re-aged, says Stephens, so
make sure you watch out for debts that are older than 7 years or
bankruptcy listings that are more than a decade old.
5. You have the right to know if you've been passed over
because of information in your report.
Creditors and employers are also required by the FCRA to notify you
if they've rejected you or taken some other kind of adverse action
(such as a higher interest rate) based on information in your
report. That way, you can make sure that the information they're
using to judge you is correct. "They don't want people being denied
a job or a promotion based on a credit report and the credit report
has false or misleading information," says Flitter.
6. You have the right to place a red flag on your credit
report if you think your information has been compromised.
The Fair Credit Reporting Act also gives you the power to exert at
least some control over your credit report if you think your
personal information is in danger from fraud or identity theft.
"One of the rights that a consumer has under the FCRA is the right
to place a fraud alert on their credit report," says Stephens. The
fraud alert
won't lock down your credit report the way a credit freeze will.
Anyone with a permissible purpose, such as a credit card lender,
will be able to still see the credit report.
However, it will let lenders know that they need to double-check
your identity before they give you extend you credit. "It warns the
creditors to take extra precautions," says Stephens.
The free fraud alert will last for 90 days, but it can be
renewed indefinitely, he adds.
Don't stop checking your reports
Finally, once you have determined that your credit information is
safe and your reports are error-free, continue to periodically
check them to make sure the information is still accurate and your
data hasn't fallen into the wrong hands. A mistake can turn up at
any time and sometimes errors that were corrected once will show up
again. "Obtain a current credit report and get one at least once a
year," says Flitter. "That's the first thing everyone can do for
himself or herself."