The Federal Credit Reporting Act or the FCRA is a United States federal law that governs the collection and dissemination of consumer credit information. It is a safeguard for the fairness, accuracy and privacy of personal credit information that is obtained by the credit reporting agencies. The law was first enacted back in 1970 and the most recent amendment was in December 2003.
Credit reports are common and frequently utilized in the United States. The original purpose of a credit report was to evaluate the creditworthiness of an individual for obtaining credit but now credit reports are also used for such things as insurance underwriting and employment applications. As of this time, it is completely legal for an individual to be denied insurance or denied or terminated employment based on what is contained in a credit report.
A credit-reporting agency is a business that collects, compiles and sells credit information on consumers. In the United States there are three major credit-reporting agencies, TransUnion, Experian and Equifax.
The FCRA was enacted to protect consumers from incomplete, unfair and inaccurate information on a credit report. It gives consumers the right to dispute and challenge any information on a credit report that is deemed to be inaccurate or erroneous in any way. If there is untruthful information showing on your credit report you have the option to issue a dispute to the credit bureaus. They will have 30 days for receipt of your dispute to either verify the accuracy of what they are reporting or delete it from your report.
Under the FCRA, a consumer is also entitled to receive one free credit report from each of the credit bureaus one time per year. In order to receive your report you just need to submit a request. If you are denied credit because of something that is listed on your credit report you also have a right at that time to receive a report. The credit bureau that is reporting the negative information must provide a report to the consumer.
Frequently negative information is removed from credit reports based upon disputes. If the information is removed from a credit report because of a dispute the credit bureaus cannot reinstate the information unless they notify the consumer in writing.
The amount of time that negative information can remain on an account is also regulated by the FCRA. Generally a listing can only remain on a credit report for 7 years following the delinquency. In the case of a bankruptcy the listing can remain for 10 years and in the case of a tax lien, the limit is 7 years after it is paid off.
It is worth the time and energy it takes for a consumer to issue a dispute to the credit bureaus. It has been estimated that as many as 40% of all disputed listing are removed because the information cannot be verified within the time period. Accurate and truthful information should not be disputed and should stay on the report but a consumer should try to get all erroneous information deleted through the dispute process provided by the FCRA.