According to a Consumer Reports study, over a third of volunteers found errors in their credit reports when they checked them. Sometimes errors can be small and not affect anything. Other times, they could result in less favorable credit terms or even denial of applications.

Because of this importance, the Fair Credit Reporting Act, or FCRA, aims to keep errors to a minimum. Let’s look at what you need to know about the FCRA and how it can help you.

What Is the FCRA?

The Fair Credit Reporting Act is a federal law that helps protect consumers’ rights regarding their credit information. It addresses who can access your credit report and why. It also makes sure your credit files are accurate, fair, and private.

The law was passed in 1970 to ensure consumers know what rights they have regarding their credit reports and consumer information. Many people know there are three major credit reporting agencies, Experian, TransUnion, and Equifax. 

However, some people are unaware that other institutions can also collect and use this information. The FCRA helps address these other uses as well.

Why Is the FCRA Important?

Your credit history plays a big part in what you can do financially. If you apply for any form of credit, the issuer will almost certainly check your creditworthiness. To do this, they might take a look at your credit report or credit score.

But your credit can even affect other important parts of your life. In some states, employers may look at your credit before hiring you. Insurance companies can use it to decide if they want to offer you coverage.

Many landlords even check your credit to see if they can expect you to pay rent on time. Because of how important your credit is to so many things, it’s vital that the information in your report is accurate and fair but also protected.

Credit Accuracy and Fairness

Part of the FCRA allows you the right to request all of the information in each of your credit files once every 12 months for free. This is an important thing as it allows you to check over your information and make sure there isn’t any inaccurate information.

Knowing this information is critical in resolving problems with your credit. Without this knowledge, you would be unable to even begin the process of correcting mistakes. 

However, if you notice something is wrong, you can begin this process. The Fair Credit Reporting Act gives you the right to dispute any information in your report that you think is inaccurate or incomplete. 

If this is the case and you dispute it, the FCRA outlines how the credit bureaus and data furnishers will handle the dispute. This is done in order to ensure that the dispute is accurate. 

You might have your credit file pulled for an application for credit, employment, or insurance. If your file is used to deny your application, the FCRA says that you should be told that this happened.

Consumer Privacy

The FCRA helps maintain your privacy when it comes to your credit information. It allows you to have access to your credit report. However, it also restricts access to people and entities that have a “permissible purpose.” 

This means creditors, insurance companies, and landlords can get access to your credit report. Typically, this is because you have a financial relationship with these entities. Though you generally have to give them permission. 

However, only some states allow employers to have access to your credit report. Even then, they must meet certain requirements, and you must give written consent.

The Fair Credit Reporting Act also gives you the right to put a security freeze on your credit reports. This means you need to lift the freeze or provide a creditor with a PIN for them to access your credit report. Otherwise, lenders cannot check your report.

In addition, the law allows you to opt-out of pre-screened credit offers, which can be helpful in maintaining your privacy.

Actions to Take 

You should make sure to check each of your credit files each year. Look over them to see if there are any mistakes or inaccuracies. If you notice any of these problems, you need to take action.

If you believe any information is inaccurate or incomplete, you should dispute it. You’ll need to contact the credit bureau. They will launch an investigation with the data furnisher to see if the information is correct or not.

If the information is inaccurate, the credit bureau will correct it or remove it during a certain time frame. Keep in mind that accurate negative information will still show on your report. This will fall off after a certain time.

Sometimes you may have a more difficult time with your credit information. Many people’s identities are stolen each year, or they are confused with a person with a similar name or social security number. Or sometimes, the credit bureau can’t or won’t resolve an inaccuracy.

If you are in any of these situations, the best course of action is to work with a lawyer that specializes in FCRA cases. The attorneys at regularly work on these kinds of cases and can help you too.

Know Your Rights with the FCRA

It’s important to be an informed consumer when it comes to your credit. The FCRA makes it easier to make sure your credit information is accurate, fair, and private. But, you should always make sure to know your rights and take action when needed.

If you found this article helpful, be sure to check out our other personal finance articles too.


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