What is the Fair Credit Reporting Act?

The Fair Credit Reporting Act (FCRA) is a federal law that regulates the credit reporting industry and provides guidelines for consumers to dispute errors on their credit reports. The law was passed in 1970 and has since been amended several times, most recently in 2003 with the addition of the Fair and Accurate Credit Transactions Act.  

The FCRA serves several purposes, including protecting consumers from inaccurate or incomplete credit reporting, ensuring that credit reporting agencies maintain fair and accurate credit reports, and giving consumers the right to dispute and correct errors on their credit reports.  

For instance, an individual may discover a credit account in their credit report that is not theirs or a late payment that they never made. These errors can result in higher interest rates, difficulty obtaining loans or credit cards, and even job or housing rejections, and therefore can be disputed with the credit reporting agency and, if necessary, the creditor. By doing so, consumers can improve the quality of their credit reports, which may ultimately affect the quality of their credit scores. 

Another essential aspect of the FCRA/FACTA (Fair and Accurate Transactions Act of 2003) is giving consumers the right to access their credit reports for free once a year from the three major credit reporting agencies – Equifax, Experian, and TransUnion. By reviewing these reports, consumers can check for inaccuracies and errors that could negatively impact their credit scores.  

The FCRA outlines the process for disputing errors on credit reports. Consumers can dispute any inaccurate or incomplete information on their credit reports directly with the credit reporting agency or the creditor who reported it. The credit reporting agency, data furnisher, or creditor must investigate the dispute and inform the consumer of the result of their investigation within 30 days.  

In addition to these provisions, the FCRA requires that credit reporting agencies and data furnishers / creditors provide consumers with certain disclosures and notifications. For example, suppose a consumer is denied credit based on information in their credit report. In that case, the creditor must provide the consumer with a notice explaining the reasons for the denial and informing them of their right to obtain a free credit report within 60 days.  

Familiarizing yourself with the FCRA is crucial if you embark on a credit repair journey. By understanding your rights under the law, you can take control of your credit report and work to correct any errors or inaccuracies that may be hurting your credit score.