A consumer’s financial future can rise and fall on what’s in their credit report so keeping a close eye on the contents should be important to everyone. Credit reports are used to decide who gets a loan, a credit card, a job, or even an apartment to rent, so few things are more crucial than having a credit report free of errors.
Still, credit report errors are made, and the consequences can be devastating. That’s why it’s vital to look at your credit report at least once a year and make sure all the information in it, is accurate. Federal law allows you to get a free credit report from each of the three major reporting bureaus by signing up at AnnualCreditReport.com.
Recognizing the life-altering power of credit information, Congress adopted the Fair Credit Reporting Act (FCRA) in 1970 to protect consumers and regulate how credit information is used and disseminated. The law gives consumers the right to know what’s in their credit reports and free access to the information credit rating agencies use to assign credit scores.
The FCRA also requires that anyone who denies a person credit, insurance or employment because of what is in their credit report, tell you where they got the information and how to contact the issuer.
The Federal Trade Commission enforces the FCRA. The Dodd-Frank Act transferred most of the rulemaking responsibilities to the Consumer Financial Protection Bureau, but the FTC still retains enforcement authority.
The nation’s three largest credit reporting agencies – Equifax, Experian and TransUnion – are required by law to do everything in their power to accurately gather and report consumer information. Together, they keep files on more than 200 million Americans and issue more than three billion reports a year.
Given the volume of information, it’s inevitable that errors occur. The FCRA gives consumers the means to detect inaccuracies in their reports and file complaints. It also requires reporting agencies to investigate and correct bogus information.
Mistakes are often clerical, but sometimes they’re the result of old information reported as current. The New York Times reported the troubles of a Mississippi woman whose $40,000 second-mortgage debt was discharged through a bankruptcy filing in 2007. But four years later, the debt appeared on her report as unpaid. She tried repeatedly to get the error removed, but it took intervention from Mississippi’s attorney general to have her report corrected.
Cases like that are common. State attorneys investigate FCRA complaints and many have consumer information on their web pages to let people know what their rights are and the steps to take if they uncover erroneous information.
Common violations of the FCRA include:
Not all FCRA actions are the result of errors or poorly maintained files. For example, the Los Angeles Times reported about a data broker that agreed to pay $800,000 in a settlement with the Federal Trade Commission for allegations he illegally sold personal information to human resources, background screening and recruiting companies.
If you’re turned down for credit or have some other reason to suspect that a credit report might have erroneously damaged you, get the name of the national credit agency that provided the report. A landlord who turned you down for bad credit or a bank that denied you a credit card will tell you which agency issued the report.
Next, contact the agency and request a copy of the report. Keep in mind that if the report contains incorrect information, other agencies could be using the same information in their reports. The agency that provided the information must supply you with its report within 30 days of the denial for free. Otherwise, it can charge a fee to see a report.
If you find inaccurate or outdated information, notify the credit reporting agency in writing, explaining the error and demanding that it be immediately corrected. If the agency investigates and does nothing, and if you are still sure the report contains errors, contact the Federal Trade Commission or the state attorney general’s office nearest you.
It’s important to know your rights under the Fair Credit Reporting Act:
If your rights have been violated under the FCRA, you are entitled to seek actual or statutory damages, recover attorney’s fees and court costs and request punitive damages.
There are several common violations of the Fair Credit Reporting Act, involving both the thousands of companies reporting information and the three major bureaus taking the information and assigning it to your credit report.
Some of the common violations include:
When your credit circumstances change, your credit report must be updated. If it’s not, that’s a violation. How could some violations occur?
Mixing files with someone else who has similar background information (sometimes as careless as failing to distinguish the Jr. and Sr. in similar surnames).
When submitting a written dispute about the accuracy of your credit report, the credit bureaus must follow proper procedures, such as conducting an investigation, correcting inaccuracies or removing a disputed debt. Sometimes, agencies fall short in these areas.
Creditors are obligated to note every disputed debt and submit corrected information, stop submitting incorrect information when it has been reported, conduct an internal investigation of disputes within 30 days and provide a reasonable procedure to submit a written dispute or report of identity theft.
Your credit report can be disclosed only to entities with a “valid need,’’ such as creditors, landlords, insurance providers, utility companies and employers (with your consent). It’s also a violation to pull a credit report for an impermissible purpose, such as determining if you are collectible in a lawsuit, an employer pulling the report without permission or a creditor on a discharged debt in bankruptcy using the report to check on your current financial activity.
You must be given notice on the reporting, handling and use of your credit information. Violations could include:
It’s important to be educated and know your Fair Credit Reporting Act rights.
The information covered under the Fair Credit Reporting Act is so critical to the financial health of an individual that when violations of the FCRA occur, the victim can file suit and collect for damages.
The extent to which a victim can be compensated depends largely on whether the violation was willful or negligent. The parties responsible for possible violations include credit reporting agencies, businesses furnishing the information to credit agencies or someone using information off the credit report to make a decision about a job, or housing.
These are the more serious violations – and more highly compensated – because it means the agency, business or individual was aware their actions would cause harm to you, but went ahead and did them anyway.
The types of damages that can be compensated here include:
When an agency, business or individual fails to exercise proper care or takes action that a reasonable person would not with regard to your credit information, that is “negligent” behavior and money damages can result.
The types of damages available are the same as with willful violations, namely actual damages (no limit); statutory damages (usually between $100 and $1,000); punitive damages (no limit) and attorney fees and court costs.
Credit reporting bureaus have the right to terminate investigations of violations if the agency determines that the consumer’s complaint is frivolous or irrelevant.
Typically, this happens when the consumer fails to offer sufficient information to investigate the disputed information.
They also may lose a court case if they filed suit in bad faith or to harass an agency, business or individual. If this happens, the consumer may be required to pay the attorney fees for filing bad faith papers.
Here are four key deadlines to remember when dealing with the Fair Credit Reporting Act.
The three major credit bureaus are required to provide you with one free copy of your credit report every year, if you request it. You must properly identify yourself, of course. The Web site AnnualCreditReport.com is a prime place to obtain your free annual credit report.
In some cases, the credit bureaus also must provide you with another free copy of your credit report if:
There is much emphasis on the three nationwide consumer reporting companies — Equifax, Experian and TransUnion — but it’s useful to know there are other sources of consumer reporting information.
The Consumer Financial Protection Bureau has published a list of other companies that self-identify as consumer reporting agencies. These companies collect information and provide reports to other companies about you in the areas of credit, employment, residential rental housing, insurance and other decision-making situations. It’s worth a look to determine which of the companies could be important to you.
This list, while not all-inclusive, has been independently verified by the CFPB.
Meanwhile, here are the best contact numbers for the three nationwide consumer reporting companies:
Problems with credit reporting bureaus are not unusual. Getting timely corrections on mistakes on your credit report can be difficult, but is worth pursuing.
If you have questions about the credit reporting bureaus and how information is gathered, you should contact a nonprofit credit counseling agency like InCharge and speak with a certified counselor about the problem.