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What Is the Fair Credit Reporting Act and How Does It Affect Me?

U.S. Capitol

Your consumer credit score offers a snapshot of your borrowing and payment history. Creditors use the information reported in your consumer credit file to determine whether you are creditworthy, meaning you are financially responsible enough to be given credit. To protect the authenticity of your credit file, the federal government has approved common practices that all creditors, collectors and credit reporting companies must obey. These practices are outlined in the Fair Credit Reporting Act.

What Is the Fair Credit Reporting Act?

The Fair Credit Reporting Act is legislation that guarantees your right to have complete and accurate information reported in your credit file. The act holds all credit reporting companies to a uniform standard of behavior regarding the way in which credit information is reported and investigated for accuracy.

Summary of the Rights Listed in the Fair Credit Reporting Act

As a consumer, you have the right to know if information in your credit file has been used against you. If anyone denies you credit or takes an adverse action against you, you must be notified in writing, as well as given the name, address and phone number of the agency that provided the information.

Because the information in your credit file determines your creditworthiness, you have the right to know what is in the file. To obtain a free copy of your credit file, visit the AnnualCreditReport.com website. There, you may request and obtain all the information about you in the files of the three major national credit reporting companies – TransUnion, Experian and Equifax. You must provide your full legal name, Social Security number, date of birth, address and telephone number.

If an employer, credit card company or insurance company denies your request for a job, line of credit or service, you may obtain a free disclosure of the action. However, you are only entitled to a free file disclosure if the person or company has taken adverse action against you because of information in your credit report.

How Does the Fair Credit Reporting Act Affect You?

The Fair Credit Reporting Act affects you in numerous ways. First, if you are the victim of identity theft, you can place a free fraud alert in your credit file. This alert notifies existing and future creditors to the fact that, as a result of fraud, inaccurate information is in your file.

Second, the act minimizes the risk of harassment from bill collectors and other third party collectors. According to the act, bill collectors and credit card companies cannot contact you by phone if you do not wish to be contacted in this manner. Other rights you have per this act include the right to limit “pre-screened offers,” the right to limit who gains access to your file (including whether employers are granted access), the right to dispute incomplete or inaccurate information, and the right to request your credit score.

If a credit card company violates your consumer rights, you may seek damages in court. The Fair Credit Reporting Act limits the amount of damages you may receive.