The Fair Credit Reporting Act and How It Affects Your Credit Report

Having a good credit can save you a lot of money. You may have an excellent credit score, but it could be undermined by having inaccurate information on your credit report. It will be unfair for anyone to have their credit score impacted by something that wasn’t their fault.

Luckily, there is a federal law called the Fair Credit Reporting Act that can help those in this type of situation.

What is the Fair Credit Reporting Act?

The Fair Credit Reporting Act (FCRA) is a federal law that was established to ensure that credit reporting agencies, such as Equifax, Transunion, and Experian, maintain fair and accurate private credit reporting in consumer credit reports. The FCRA also provides you with the right to access the information in your credit history report and to have any incorrect information removed from your report.

If your rights are violated, then you can hold credit reporting agencies or others that violated your rights liable. The FCRA allows for a range of possible remedies. Some of the solutions that you have available include:

  • Punitive damages
  • Actual damages
  • Statutory damages
  • Damages for negligence
  • Attorneys fees
  • Court costs

If you believe that your rights have been violated, then you should contact an attorney as soon as possible to help you determine if you have an FCRA case. There is a time limit for filing an FCRA compliant. You must file either: within five years after the date of the violation or two years after you discovered the breach.

What is the Fair Credit Reporting Act of 1971?

The FCRA was originally passed in 1970.  This law was adopted by the United States Federal Government to ensure that information reported in credit reports is fair, accurate and stays private. This bill prohibits credit reporting agencies from listing inaccurate or incorrect information in consumers’ credit reports.

Because the information contained in a credit report is used to make important decisions, such as whether or not to hire an applicant, the FCRA prohibits credit reporting agencies from keeping information in credit reports a secret. Under the Act, individuals have the right to view information in their credit report and challenge information that is incorrect.

The federal government is responsible for enforcing the FCRA. Agencies and organizations that violate the FCRA can be held liable for civil penalties and may face lawsuits for not removing incorrect information.

What Are Your Rights Under the Fair Credit Reporting Act?

The FCRA was established by the U.S. Federal Government to ensure that information in consumers’ credit reports is recorded fairly. The FCRA affords you several rights including:

  • The right to know what is in your file.
  • A free credit report once per year from all the major credit reporting agencies, such Equifax, Transunion, and Experian.
  • The right to dispute information in your report that is untruthful or inaccurate.
  • Notification if a company or employer uses something in your file to take an adverse action against you.
  • The right to have outdated, old information removed from your report.

If a credit bureau or creditor violated your rights, you might be able to recover compensation for damages in court. For more information contact an attorney skilled in FCRA cases.

What is the Fair Credit Reporting Act How Does It Help Consumers?

The Fair Credit Reporting Act (FCRA) is a United States Federal law that regulates consumer credit reporting. It compels credit reporting agencies, such as Equifax and Experian to ensure that the information that they gather and report about you is factual.

The FCRA helps you by preventing misinformation from being used against you. When the information reported about your credit or background is not accurate, or you can’t correct problems with your consumer credit report, then you are impacted in a very negative way. A company might decide not to hire you based on inaccurate information, or you might have to pay more for auto insurance. That is why the FCRA was established— to protect your right to have accurate and fair information reported about you.

If a business — whether a creditor, user of your credit history report or a credit reporting bureau— violates your rights, then you have the right to sue them to seek compensation for any damages that you suffer as a result of the inaccurate information.  

What is in an FCRA Background Check?

A background check is typically conducted during the process of employment.  A background check might include a credit, driving or criminal history check. Employers use the information gathered in a background check to determine if someone would make a good candidate for a job. Unfortunately, up to one-third of all credit reports contain significant errors. Given that credit reports are used to make employment decisions, it is a good thing that the federal law provides you with some protections against untrue or unfair information being used against you for employment purposes.

Most background checks conducted by employers are covered by the Fair Credit Reporting Act of 1970. The purpose of it is to prevent inaccurate information from being used against consumers. When employers use a third party to conduct a background check, they must follow FCRA regulations. The Fair Credit Reporting Act provides you with specific protections. When it comes to background checks, an employer must:

  • Provide a clear and conspicuously-written disclosure that says that they may run a background check.
  • Obtain your written permission to run a background check.
  • Notify you that you are entitled to a free copy of your report within 60-days if an adverse action was taken because of information reported in it.
  • Provide you with a notice of your rights if they decide not to hire you based on information gathered in your report.
  • Provide you with the name and address of the consumer credit reporting agency that produced the report if they decide not to hire you based on the report.

An employer cannot discriminate on you based on information contained in your report. So, they cannot refuse to hire you based on your age, race, sex, religion or disability.  

If you suspect that your rights have been violated based on the FCRA or that you have been discriminated against by an employer based on your credit history or report, then contact an FCRA attorney to discuss what remedies you’re entitled to under the law.

What is the FCRA Compliance?

The FCRA or Fair Credit Reporting Act is a federal law that was established in 1970. It protects consumers from unfair and inaccurate information being reported in their credit reports. In 1996, the code was updated to include other reports, including background checks that are used by employers for screening potential candidates.  Any employer that uses a third party to conduct a background check must stay compliant with FCRA laws. They must:

  • Secure your authorization, ahead of time and in writing, before performing a background check.
  • Provide you with a copy of your report and rights before taking any adverse action against you.
  • Provide you with the name, address and telephone number of the consumer reporting agency if they take adverse action against you based on information gained in a background check.  

If an employer does not comply with the FCRA when conducting a background check, then you can file a complaint with either the state or federal court.  If you suffer harm from an employer’s lack of compliance, then you might be entitled to a settlement. For instance, if an employer refuses to hire you based on information in a background or credit report and won’t provide the name of the credit reporting agency that supplied the information to them, then you might have grounds for a lawsuit.

What is Permissible Purpose Under the FCRA?

In the wrong hands, the information contained in your consumer credit report can be used to commit fraud or identity theft. You have the right to worry about the privacy of your credit information. Fortunately, the FCRA protects the confidentiality of sensitive information contained in your consumer credit report.

Under the FCRA, information can only be released for specific reasons — or permissible purpose. So, what is a permissible purpose? Here are some examples:

  • You authorize, in writing, for credit information to be released to a third-party.
  • A court order, Grand Jury or subpoena requests for information in your consumer credit report.
  • A creditor who is involved in determining whether or not to extend credit obtains your written permission to conduct a credit check.  
  • A potential employer has your written consent to conduct a background check for employment screening.  
  • An insurance company requests your credit history as part of the underwriting process.

Without permissible purpose, a company or person does not have the legal right to pull your credit. If they do so, then they can be held liable under federal FCRA laws. You should contact an FCRA attorney to determine if you have a case if you notice that your credit is pulled without a permissible purpose. You might be entitled to seek compensation for damages. Additionally, the FCRA allows consumers to recover reasonable attorney fees from the party that violated the law.

The Fair Credit Reporting Act and How It Affects Your Credit Report
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