Given the ease with which your credit report can be weaponized, it should come as little surprise the federal government has mandated the implementations of certain safeguards.
In addition to ensuring the accuracy, fairness and privacy of your credit information, the government regulates the way credit bureaus can gather, interpret and share your data. The goal is to prevent misinformation from harming your reputation.
Let’s take a closer look at how the Fair Credit Reporting Act (FCRA) protects you.
Guarantees the Right to Review Your Report
Under the tenets of the FCRA, you have the right to be told when the information in your credit report has been used to deny you credit, a job, or insurance coverage. Further, you have the right to request and receive all of the information each of the three major credit-reporting bureaus has on you.
This is facilitated through the website AnnualCreditReport.com. You’re entitled to one free report from each of the bureaus every 12 months. The smart play here is to request one of them every four months so you can spot changes sooner. In other words, rather than requesting all of three of them at once, ask for one at a time over each four-month period.
Restricts Access to Your Information
The only way people can get access to your credit history is by having a permissible purpose. Whenever you fill out a loan application, you give the lender permission to access your credit history to help them evaluate your application.
Employers must also acquire your written permission before requesting your records. There are certain other requirements they must meet before the data can be legally released to them. Even then, certain states deny employers this access.
Affords You the Right to Dispute
Human beings create credit reports and people make mistakes — all the time.
It is entirely possible for a credit report to contain erroneous information. This is why it’s important to have the right to review your credit report on a regular basis — and to actually do so.
There could be incidences of identity theft and credit fraud of which you were unaware, both of which can reduce your credit score if allowed to stand as fact. Among the pros and cons of debt consolidation is the possibility some of your paid-off accounts might not be reported as such. This too, can have a detrimental effect on your credit score.
For these reasons, having the right to dispute the information contained in your credit report is critical. Imagine how screwed up things could get if people could post whatever they wanted and you had no say. Now, with that said, there’s little you can do about accurate information, other than your best to make sure it’s positive.
Rather than giving any lender free rein to access your report whenever you submit an application, you can specify which lenders can get to it and assign them a PIN to facilitate them doing so. This prevents hackers from getting into your report under the guise of being a legitimate lender. It also makes it more difficult for credit thieves to get a loan approval without your knowledge.
These are just four examples of how the Fair Credit Reporting Act protects you. You’ll find a more detailed accounting of the FCRA at the Consumer Financial Protection Bureau website. Designed specifically to give you more control over your credit report and the information it contains, the Act is bolstered by a variety of similar state laws.