The Fair Credit Reporting Act of 1970 has stood the test of time, and the Consumer Credit Reporting Reform Act has provided additional protection to the American consumer. If you take the time to understand the credit reporting system and monitor the “health” of your own credit profile, it will be time well spent.
Credit bureaus collect objective financial data for use by bankers, retailers, credit card issuers, and landlords. In a typical file, data is provided by creditors and gathered from public records. It includes tax liens, bankruptcy information, outstanding loans, and details of credit card history, including the credit limit on each card, purchases, balances, and payment record.
Most people are not aware of the financial paperwork and personal information accumulating in the files of consumer reporting agencies. The Fair Credit Reporting Act of 1970 provides some control over the harm third-party reports can do. Specifically, consumers have the right to request and to be told what is in their files, and inaccurate information must then be corrected or deleted.
Many consumers strive to live within their means and take great pride in paying their bills on time. When they apply for credit, such as a mortgage, however, they may discover some shocking news: Their credit report contains errors that prohibit them from obtaining the credit they need. Typical errors that can appear in a credit report include the following:
- Mistakes involving your name and a similar name
- Inclusion of someone else’s credit problems in your file
- Incorrect balances on current credit accounts
- Closed accounts listed as current
- Accounts of ex-spouses still listed with yours
- An inaccurate Social Security number
Those who question the reliability of such evidence are allowed by Federal law to obtain one free credit report per year from each of the three major credit reporting companies: Trans-Union, Equifax, and Experian. Further, the major credit reporting bureaus offer programs that provide the most active credit-seeking consumers with ongoing access to their files for a small fee.
For your convenience, the three consumer reporting companies have set up a central website and a toll-free telephone number through which you can order your free annual report from each company. To order, visit annualcreditreport.com or call 1-877-322-8228.
If you discover that your credit report jeopardized credit or loan approval, you have the right to know the “nature and substance” of the information at no cost. The denying creditor must disclose which company prepared the report, including its address. Should there be incorrect information, the agency must re-investigate and then confirm, correct, or delete the information accordingly. If the re-investigation proves the information is accurate, brief explanations of extenuating circumstances can be added. Lists of those who have received files within the past six months or the past two years, if for employment purposes, are also available to the consumer.
Should corrections be necessary, all of the requesting parties can be sent an updated version by the reporting agency. It is important to note that if you find a discrepancy in your report with one bureau, making the correction with that one doesn’t correct them all, since each agency has its own independent database.
Protecting your credit history is a necessity since a good record can help you secure the money you need to meet your financial goals. With identity theft on the rise, it is more important than ever to remain vigilant about your personal credit report. Taking the time for periodic checkups can go a long way toward helping to protect your good name.