Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act (FCRA) is the act that regulates the collection of credit information and the access to credit reports. It was passed in 1970 to ensure fairness, accuracy and privacy of the personal information contained in the files of the credit reporting agencies.

The Fair Credit Reporting Act is the primary legislation that governs all activities pertaining to the reporting of credit information for consumers. Two key areas of focus for the Act include the protection of credit reporting information and the standards for how credit information is recorded. As designated by the FCRA, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau are the two government agencies charged with overseeing and enforcing the provisions of the Act. The entire FCRA can be found in United States Code Title 15, Section 1681.

Section 604 of the Act discusses permissible purposes for obtaining a consumer’s credit report. Primary purposes allowing for a credit report to be released from a credit reporting agency include the review of a borrower’s credit profile for a credit application, the release of a credit report for a background check and the request of a credit report by the consumer. Other permissible purposes include an order from the court, business dealings and child support considerations. The FCRA also has detailed requirements outlining the disclosure and notification policies that must be followed by entities seeking a consumer’s credit report for various reasons.

The FCRA also lays out clear standards for the information that should be included on a credit report and the length of time that entries can remain on a credit report. Credit reporting agencies establish a trade line for each credit account that is opened by a consumer. Any information pertaining to a consumer that is reported by a creditor is recorded by trade line. Additional information beyond standard credit account trade lines may also include the reporting of a child support liability, tax liability or bankruptcy filing.

Certain reported items will be released after a specified amount of time. Most adversely reported items remain on a consumer’s credit report for seven years. Certain instances such as bankruptcy can remain on a credit report for ten years.

Under the FCRA, consumers have the right to:

• Know what's in their file.
• Free file disclosure once per year from each of the major credit bureaus.
• Verify accuracy of report when required for employment purposes.
• Notification if a file has been used against them.
• Dispute and correct information that is incomplete or inaccurate.
• Remove outdated, negative information (seven years old or 10 years in the case of bankruptcy).