Credit Report Company

Benefiting From The Fair Credit Reporting Act
Written by Gary Cole   
For many years, consumers knew that somewhere, somehow, information about their credit history was being compiled.  That was about all they knew though, since they were not allowed to see their own credit report.  If their loan application was declined due to credit information, there was no way to find out what that information was, or if it was accurate.

Your rights under the FCRA

All of that changed in 1970, with the passage of the Fair Credit Reporting Act (FCRA).  The FCRA is a federal law that regulates the collection and dissemination of consumer information, and most especially credit information.  It allows consumers access to their personal credit information, and the right to dispute items they believe are inaccurate.  

As an adjunct to FCRA, in 2003 the Fair & Accurate Credit Transaction Act  (FACTA) was enacted to give consumers the right to receive a free credit report every year. This ensures that every individual has access to credit information and has the opportunity to have errors corrected.
If a dispute is filed, the credit-reporting agency must investigate and resolve it within 60 days.  In addition, it must provide a free copy of the corrected credit report to the individual.

How to read a credit report

Once you’ve received your free copy, it’s helpful to know how to read the report.  A credit report is broken down into various sections:
  • Consumer information includes your name, addresses both current and former, as well as current and former employees. Often your date of birth and social security number is also included. It is important that this information is accurate so that you are not confused with someone else.
  • The credit summary provides a quick overview of the types of accounts you have.  Some of these include mortgages, car loans or revolving accounts like credit cards.  Total outstanding balances and delinquencies are summarized here.
  • The bulk of your credit report will contain detailed information about each account. This includes creditor name, balance, date opened, monthly payment and payment history, among other things.  You will want to pay especially close attention to this area to make sure everything is correct. Sometimes collection accounts appear in this area if they don’t have their own section.
  • There is also a section on public records, showing items like liens, bankruptcies, and in some states, past due child support payments.
  • At the end of the report is a section showing who has made inquiries on your report within the past two years.  This includes lenders who are processing credit applications, and marketers who use your score to determine if you are part of their target market.  This last type of inquiry will not impact your score in a negative way.
At first, a credit report can seem long and intimidating, but keep in mind that it lists all accounts open in the past 7 to 10 years.  Accounts that were fully paid off in that time will still appear on the report.  Your only concern is that the report shows all accounts that were paid in full.  You will soon become familiar with the format, and find it easy to scan for pertinent information.

How to use what you’ve learned

Once you’ve received your free credit report and have had a chance to study the information on it, you can put it to good use.  If you find any errors, you can act to have them corrected.  It’s usually best to contact both the creditor involved as well as the credit-reporting agency showing the incorrect information. The reporting agency must resolve the matter within 60 days and update your credit report accordingly.  Even the removal of one incorrect derogatory item can lead to a significant increase in your credit score.

If you don’t notice any errors, there is still valuable information present on your credit report.  You can see how well you are managing your debt.  Do you tend to utilize all of your revolving credit, and rarely pay it off?  Do you tend to keep a high percentage of the equity in your home tied up in second mortgages and lines of credit?  Do your bills not always get paid on time?

By answering these questions, you can get a clearer and more objective picture of your financial behavior. You may think you are a prudent saver and frugal spender, but your credit report may demonstrate otherwise.  Finding out exactly what your credit behavior is will give you an opportunity to make improvements in certain areas, increasing your credit score and improving your overall financial health.    

The FCRA was implemented so consumers would have access to the information creditors were using to make decisions about them. The biggest benefit is that you can make sure all of that information is correct, and that credit-reporting agencies are obligated to help you in that endeavor.  The other benefit is that it provides you with detailed information about your borrowing behavior that can help put you on the road to greater financial success.

The Fair Credit Reporting Act guarantees access to your credit information so you can correct errors and learn more about your borrowing behavior.
 
Next >
[ Back ]

Main Menu

Home
Basics
Methods
Privacy Policy
You are here  :Home arrow Methods arrow Benefiting from FCRA