Credit reports have a direct and important impact on consumers’ lives. A credit report details your credit history and activity, lender information, credit limits, and loan amounts. Every month, lenders submit updates on account status to credit reporting agencies (CRAs), affecting your overall score. On-time payments can increase your score, and late or missed payments can lower the score. Lenders use credit reports to gauge your creditworthiness before approving loans or credit.
Credit reports also contain negative information on delinquency history as well, such as bankruptcy, repossessions, foreclosures, and lawsuits. Negative information remains a part of your credit history for up to seven years and can hurt your chances of securing additional loans or credit. Because of this, it is important to regularly review your credit report and dispute any incorrect information.
What Are Credit Reporting Agencies?
CRAs gather financial information on more than 200 million Americans each month, generate a report, and sell the information to businesses to use in determining whether to approve a loan or credit, interest rates, and conditions.
Owing to the widespread use of information CRAs collect and sell, Congress passed the Fair Credit Reporting Act (FCRA) in 1970, aimed at regulating the three major agencies, Experian, TransUnion, and Equifax, to ensure the information they gather and distribute is fair and accurate. The law also extends to banks, credit unions, and any agencies that sell medical records, rental and check writing history, and businesses who use credit reports in hiring practices.
The intent of the FRCA is to protect consumers from misinformation regarding credit history that has a negative impact on the ability to secure loans and credit. The law details specific guidelines on how CRAs gather and verify information and how such information should be released.
The FRCA also provides basic rights to consumers regarding individual credit history information, which are as follows:
- Access: The FRCA requires CRAs to provide consumers with a free copy of credit reports once per year, on request.
- Protected access: The law outlines that only business with valid need have access to consumer credit information, such as banks, insurance companies, or landlords, and consumers have a right to know who requests the reports.
- Accuracy: Disputes of inaccurate information must be investigated by the CRAs within 30 days of the request. If the information cannot be verified, agencies are required to remove it or allow you to add an explanatory statement.
- Removal of outdated information: Negative information, such as foreclosure or court rulings, must be removed from the report after seven years and after 10 years for bankruptcy. Criminal records can be included in credit reports permanently.
- Medical privacy: Medical information cannot be used when lenders are making a credit decision; therefore, it cannot be included in credit reports.
- Limit offers: Consumers can request removal from unsolicited offers for insurance or credit.
- Personal account protection: To protect personal account numbers, the law provides that credit reports are not permitted to list full Social Security numbers, and businesses cannot publish full credit card account numbers on receipts.
- Negative information notice: The law grants you the right to be notified of any negative information financial institutions submit or plan to submit to CRAs.
- Seek damages: If a CRA or a consumer report user violates the FRCA, you have the right to sue for damages in state or federal court.
- Reason for denial: You have the right to know why you were denied for credit, insurance, or employment based on your credit report.
- Obtain scores: Each CRA develops a unique credit score for each consumer, which you can request.
Outlined within the FRCA are smaller acts specific to the financial industry and further protect consumers relating to the information contained in credit reports.
Credit Card Accountability Responsibility and Disclosure Act (CARD)
The CARD act establishes that credit card companies cannot increase interest rates on existing credit card balances and requires companies to provide a 45-day notice prior to interest rate increases on new balances.
Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA)
Passed in 2010, the Dodd-Frank Act prevents major financial institutions and creditors from utilizing unfair practices and is intended to prevent major recessions. Several statutes of the DFA are stand-alone and are an integral part of the financial system:
- Consumer Financial Protection Bureau (CFPB): The CFPB is a government-run consumer watchdog on the financial industry and educates consumers on laws and regulations pertaining to mortgage and banking institutions and credit card companies.
- The Volcker Rule: The Volcker Rule was established to protect consumers by restricting large banks from making high-risk investments with their own funds, prohibiting proprietary trading in hedge or private equity funds.
- Financial Stability Oversight Council (FSOC): The FSOC is a nine-member council that monitors the financial system and regulates companies from practices that pose a threat to the economy.
- Office of Credit Ratings: The U.S. Security and Exchange Commission’s Office of Credit Ratings protects investors and maintains fair and efficient policies. It further educates investors on debt security investments, such as bonds, notes, and asset-backed securities, and assigns credit ratings to governments and companies.
Fair and Accurate Credit Transactions Act (FACTA)
FACTA details rights to protect consumers against credit report damage from use of stolen identities and personal information to commit fraud, specifically protecting identity theft victims and active-duty military. Victims’ rights under the FACTA are:
- Fraud alert: Under the FACTA, victims have the right to have a fraud alert placed on credit reports to protect from additional fraud. The alert provides notice to lenders to be cautious of applications in the individual’s name and can be included on the report from 90 days to seven years.
- Free reports: Consumers are entitled to free copies of credit reports to review for signs of fraud.
- Fraudulent documents: Consumers may request copies of documents related to fraud. Proof of identity theft may be required, such as a police report.
- Debt collector information: Consumers can request relevant information from debt collectors, such as the creditor or amount due.
- Request an information block: In proven cases of identity theft, consumers can request that CRAs prevent the fraudulent actions from being included in credit reports and negatively affecting scores.
- Theft reporting: Once proved, consumers can request that businesses affected by the fraudulent activity do not report information of the identity theft to CRAs.
- Active-duty alert: Active-duty military members can request to have active-duty alerts added to credit reports, which requires creditors to take additional steps to verify the identity. This measure is intended to make it more difficult for thieves to commit identity theft during military deployment.
What if the CRA Will Not Correct My Report?
Consumers have the right to dispute inaccuracies in credit reports, and CRAs are obligated to either remove the information or investigate; however, the response may be that the creditor verified the information’s accuracy. If you still believe the information is incorrect, you have the right to:
- Contact the creditor. Directly contact the creditor and demand them to instruct the CRA remove the information. If you receive a letter from the creditor confirming the information is incorrect, provide a copy to the CRA. If the creditor cannot or will not help, contact the CRA directly.
- If you have additional information to prove your claim, file another dispute with the CRA.
- File a CRA complaint. You can file a complaint about the CRA with the CFPB, who will contact the CRA on your behalf or forward to a more appropriate government agency.
- File a creditor complaint. If the creditor refuses to correct the information or advise the CRA, you can file a complaint against the creditor with the Federal Trade Commission or the appropriate federal agency that oversees large financial institutions.
- File a state complaint. Depending on the laws of your state, you may be able to file a complaint with the state’s attorney general or state consumer protection agency.
- Contact your representative. Contact your congressional representative or senator to inform them the laws are not being followed, which may prompt further investigation.
- Explanatory statement. After you file the dispute, the CRA is required to include it in any report that includes the disputed information.
- Contact an attorney. Speak with a consumer protection or debt settlement lawyer to help enforce your rights to correct your credit report or file suit against the CRA or creditor.
Pennsylvania Credit Report Lawyers at East End Trial Group Assist Clients With Disputing Inaccurate Credit Report Information
Credit reports have a direct impact on your ability to secure a loan, line of credit, housing, and even employment. When the information is incorrect, the damage can be extensive. If this has happened to you, our experienced Pennsylvania credit report lawyers at East End Trial Group can help. Call us at 412-223-5740 or contact us online for a free consultation. Located in Pittsburgh, we serve clients throughout Pennsylvania.