How Credit Reports Work

Access to Credit Reports

The Fair Credit Reporting Act (FCRA) specifies who can access your report and for what reasons. Your credit report can be viewed by people you have initiated business with, such as lenders, landlords, credit card companies and other businesses. Each of these groups must have a "permissible reason" to view your report, and their inquiries count as hard inquiries.

You can also give potential employers written permission to view your report. Because they're only trying to determine your integrity by seeing how you repay and manage your debts, they get a different version than lenders get.

Companies can also get your name and address from credit bureaus in order to send you offers for pre-approved credit cards in the mail or via a dinner-time telemarketing call. These companies don't actually get a copy of or even see your credit report. They have a set of criteria that they use to screen consumers in order to come up with a list of potential customers. They use these lists for their marketing efforts. These inquiries are considered soft inquiries and do not show up on any version of the report except for the version you get. If you don't want to have your name sold to these companies, you can "opt out" by either writing to the three major credit bureaus or by calling 888-5-OPTOUT (888-567-8688). This will remove your name for two years from mailing and telemarketing lists that come from TransUnion, Equifax, Experian, and INNOVIS.

You can (and should) request copies of your report from the three major credit bureaus regularly so you can correct any inaccuracies. According to a 1998 study, "Mistakes Do Happen," conducted by the Public Interest Research Group, 29 percent of consumer credit reports had errors serious enough to cause denial of credit, insurance, etc. The Consumers Union, which publishes Consumer Reports, did a study with similar results. However, the Associated Credit Bureaus (now the Consumer Data Industry Association) sponsored its own study in 1991, and this study reported that less than two-tenths of 1 percent of credit reports contained incorrect information.

As you can see, reviewing your credit report is a good idea. A copy of your report costs $10 plus any taxes, shipping and/or handling charges. You are are entitled to a free copy of your credit report once every 12 months.

The cost of the report is regulated by the Federal Trade Commission as part of the Fair Credit Reporting Act. The FTC usually reviews the cost annually and may increase it to stay in line with inflation. That price limit was increased to $10 in 2005.

The Federal Trade Commission's Fair Credit Reporting Act (FCRA) was put into effect in 1971 to protect consumer rights. The FCRA is the federal law that regulates credit reporting companies. It specifies consumer rights to review the information and contest inaccuracies, as well as defines who can access the reports and for what reasons.

What are your rights under the FCRA?

As a consumer, you have certain rights when it comes to how your credit history is maintained and used. The consumer reporting agencies that collect and maintain this information must abide by rules set up by the FCRA. These include:

  • Report access - Only those who have a "permissible purpose" can access your report. This means that only people with whom you've established a business relationship, such as a lender, credit card company, landlord, insurer, employer, etc. can access your report.
  • Written consent - For reports that are given to employers or potential employers, written consent is required. Also, no medical information can be reported to anyone without your written consent.
  • Personal access - You have the right to get a copy of your report and a list of everyone who has accessed it. The law also sets a maximum charge for the report, which is $10 as of 2005. You are entitled to a free copy once every 12 months. These circumstances include: unemployment, welfare, fraud, or if you've been denied credit because of something in your report. In most cases, you have to request your report within 60 days of the given circumstance.
  • Credit denial - If you are denied credit or employment (or some other service or product you were seeking) as a result of something in your credit report, then the person who denied you has to tell you why and how to contact the credit bureau that provided the information.
  • Dispute inaccuracies - If you find that your report has inaccurate information, then you can dispute the information and the CRA has to reinvestigate it within 30 days. Until it is proven accurate, they cannot put the disputed information on the report unless they include your written statement of dispute along with it. If you prove that the information is inaccurate, then it has to be removed from the report permanently within 30 days. It is then the responsibility of the national CRA you are dealing with to inform the other national credit reporting agencies of the error.
  • Outdated information - In most cases, negative information stays on your report for seven years. Bankruptcy information stays on for 10 years.
  • Removing your name from marketing lists - You have the right have your name removed from lists that credit reporting agencies sell to marketers.
  • Seek damages - If someone accesses your report without "permissible purpose" or without your written permission, or violates one of the other specifications of the FCRA, then you can sue for damages.