Important decisions are made based on the information in your credit report; not just about whether you receive a credit card or a car loan, but even whether you get insurance or a job. In most cases your credit report will be the determining factor in whether you obtain the credit you deserve.
Before the days of the federal Fair Credit Reporting Act (“FCRA”), it was difficult for consumers to dispute information in their credit file. Credit reporting agencies had no incentive to fix errors in credit reports even when the error was brought to their attention. As a result, consumers were denied credit, insurance, and employment because of erroneous information. There were even cases where people were fired because their credit reports showed that they were convicted felons, when in fact they only shared the same name with an actual convict.
The Fair Credit Reporting Act provides:
- Civil liability for credit reporting agencies which do not correct erroneous information.
- A procedure for consumers to obtain copies of their credit report.
- A procedure for disputing erroneous information.
- Limitations upon who can obtain a report.
- Notification to the consumer if they are denied credit, employment, or insurance because of information in a report.
- A prohibition on placing medical information in reports.
- A 10 year limitation on the reporting of bankruptcies and a 7 year limitation on the reporting of most other adverse information.
If you are denied credit because of information in your credit report, the prospective creditor is required to give you notice that you were denied because of the report. You should request a copy of your report promptly and examine it carefully for erroneous information. If there is an error, FCRA allows you to dispute that information by informing the agency in writing of the error. Your letter should include a copy of the credit report with the disputed items highlighted and any supporting documentation. The agency is then required to “re-investigate” the information, and if it cannot be verified, the information must be deleted. However, re-investigation by the agency usually involves merely calling the creditor and “confirming” that the adverse information belongs to you. Problems arise with this approach if the creditor has made the error or if someone has obtained credit in your name, i.e. “identity theft.” In that case you must dispute the information with the creditor directly. If after the “re-investigation” the agency still refuses to remove the disputed information, you are entitled under FCRA to have a 100 word statement included in your report explaining your position on the dispute.
If you are still not satisfied with the actions of the credit reporting agency, and the agency has negligently or willfully violated the Act, the Act allows you to sue the agency for the damage it has done to your credit as well as attorney’s fees. Prior to the Act, consumers damaged by the erroneous information had to resort to traditional “common law” state remedies which rarely provided an adequate resolution.
The first step in asserting your rights under the FCRA is to request a copy of your credit report and examine it for accuracy. For a fee of $5.00 to $8.00, Equifax (800) 685-1111, Experian (888) 397-3742, and Trans Union (800) 916-8800 will provide a copy of your report. Make certain your report is accurate because in the eyes of most creditors, you are your credit report.