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What Is The Fair Credit Reporting Act (FCRA) And How Does It Protect Your Credit History?

7-Minute Read
Published on May 7, 2021

If you're concerned about your credit security and how lenders access your information, you're not alone. Credit is a major consideration when it comes to applying for a loan, and it's one of the biggest sources of worry for first-time borrowers. In this article, we'll discuss your rights under the FCRA so you'll know exactly what to expect when it's time to evaluate your credit history.

What Is The FCRA?

The FCRA, or Fair Credit Reporting Act, is a law that governs how you and lenders can access your credit history. Some major provisions of the FCRA are file disclosure – the right to see what information consumer reporting agencies have about you – and restriction of your consumer report to only those with a permissible purpose to view it.

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FCRA Requirements

Before the ’70s, different types of creditors each relied on different types of reports comprising information from lenders as well as from local newspaper notices such as arrests or marriage announcements.

If that seems weird, unfair and even discriminatory, you aren’t alone in your thinking. The federal government also recognized that this was a problem, especially as the use of credit became more ubiquitous, and set forth to make credit reporting fairer.

The Fair Credit Reporting Act was passed in 1970 to give consumers certain rights when it came to their credit histories. You can review the full text of the law on the Federal Trade Commission's website, but we've summed up the act's major provisions below.

Accuracy And Privacy Of Information

The FCRA ensures that credit reporting agencies (the companies that create consumer credit reports) only include true, verifiable information in your report and that it is kept private and only given to entities that have a valid reason – and, in most cases, your permission – to view it.

Consumer Agency

The law also ensures that credit reporting is transparent for consumers, and gives them the right to dispute inaccurate or incomplete information. If your rights under the FCRA are violated, you can sue for damages.

Fraud Protections

In 2003, the FCRA was expanded with FACTA – the Fair and Accurate Credit Transactions Act – to enhance the protections already provided by the FCRA to help consumers combat the increasing incidence of identity theft. This included giving individuals the right to a free copy of their credit report each year, as well as the ability to place fraud alerts on their credit files.

Your Rights Under The FCRA

Here are some of the most important rights you have that are protected under the FCRA, as outlined by the Federal Trade Commission and Consumer Financial Protection Bureau. Under the FCRA, you have the right:

  • To know if information in your credit report has been used to deny you credit
  • To know what is in your credit report
  • To know your credit score (though you may have to pay for it)
  • To dispute incomplete or inaccurate information
  • To have incomplete or inaccurate information removed or corrected
  • To have outdated negative information removed after a certain amount of time (typically 10 years for some bankruptcies and 7 years for other negative information)
  • To restrict access to your report only to certain entities
  • To prevent employers from accessing your report without your written consent
  • To opt out of unsolicited prescreened credit or insurance offers
  • To freeze your credit or place a fraud alert on your credit file
  • To seek damages from those who have violated your rights under the FCRA

How The FCRA Works

If you’ve ever applied for a credit card or a loan, you might recall that the bank or lender you were working with first asked for your authorization before pulling your credit. This is the first step in the process that the FCRA regulates.

Here's how the rest of that process works under standards set by the FCRA.

Tracking Consumer Activity

Your credit report is made up of information that is provided by all the lenders, banks and companies you’ve received loans or lines of credit from. Entities that provide information to credit reporters are sometimes called furnishers.

Consumer activity is tracked by different credit reporting agencies, or credit bureaus. The big three are Equifax®, Experian™ and TransUnion®, but they aren't the only players in the game. Some specialty agencies also collect information on checking accounts, apartment rental history and more.

The FCRA ensures that all of these agencies track information accurately and make your data available to you upon request.

Disputing Inaccurate Information

Did you find something inaccurate in your credit report? If you want to officially dispute it, you must initiate the process by writing a letter to the credit reporting agency and the reporting company. The reporter must then investigate your claim and report its findings to the relevant credit reporting agencies.

Let’s say you’re a victim of identity theft. You’re looking over your credit report when you notice an account that you didn’t open. One of the first steps you’ll take, in addition to reporting the identity theft to the FTC and potentially your local police department, is contacting the creditor who reported the account to let them know the account was opened fraudulently.

Thanks to the rights provided to you by the FCRA, creditors will work with you to get your account frozen or closed and remove information that was put on your credit report as a result of the identity theft or fraud.

Placing A Fraud Alert Or Freeze

To set up a fraud alert, you’ll simply contact any one of the three major credit reporting agencies – whichever one you tell must alert the other two. Fraud alerts are free and last for 1 year. During that year, any time a creditor looks at your credit report in response to a request to open credit in your name, the fraud alert lets them know that they should take further steps to confirm your identity before extending any credit.

You can also place a fraud alert preemptively. If your wallet was stolen or your data was exposed in a security breach, for example, you might opt to place a fraud alert to be safe. Deployed service members can place active duty alerts on their files, which work similarly to fraud alerts, and everyone has the option of placing a security freeze on their own file. This completely freezes your credit report so that no new accounts can be opened in your name.  

Applying For Credit

This is the main function of your credit report – to help you in applying for credit. Those who receive your credit information for the purpose of qualifying you for credit can only use that information in certain ways, according to FCRA protections.

If any information in your credit report is used against you, you have a right to know. For example, if your application for a credit card is denied, the credit card company must tell you why you were denied, and they must tell you which credit reporting company provided them the report on which your denial was based.

Applying For A Job

If you’ve ever had a prospective employer run a credit check on you before offering you a job, you know that banks and lenders aren’t the only entities interested in looking at your credit history.

Here's what you need to know about how the FCRA regulates employer credit checks:

  • These credit checks are most common for roles dealing with finances or confidential information.
  • Some states and cities have limited employers' ability to use an applicant's credit to make hiring decisions.
  • The FCRA limits how employers use credit information in all states.
  • An employer cannot run your credit without your written permission.
  • Employers must explain how your credit report will be used.
  • If you're denied employment based on credit, the employer must tell you.

Responding To FCRA Violations

If your rights under the FCRA have been violated, you may be able to sue the offending entity. If you’re successful, the damages you’ll be entitled to will depend on whether the violation was willful or negligent.

If you believe a reporting agency, reporter or receiver of your credit information violated your rights, you may want to speak to a lawyer about your options.

The Bottom Line: Credit Is Important. Know Your Rights.

Whether you’re buying a home, getting a car loan or opening a credit card, having a good credit history is vital. Luckily, the entities involved in the credit reporting process have a responsibility to ensure that they’re reporting consumers’ credit in a fair and accurate way. By knowing your rights and keeping up with your credit report, you can help ensure that your credit profile helps you secure a mortgage or other loan.

If you’re interested in beginning the mortgage application process, you can get started online today.

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Victoria Araj

Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan.