How Does the Fair Credit Reporting Act Protect Consumers?

Applicable Law

The Fair Credit Reporting Act became law in 1970. Prior to its enactment, consumers didn't have the right to view their reports. Credit bureaus often shared consumer information with lenders but didn't provide a mechanism by which consumers could challenge that data. According to the Electronic Privacy Information Center, the reports also contained data not related to credit worthiness, such as marital status and sexual orientation. Congress passed the FCRA in response to such abuses.

The law now requires bureaus to allow consumers unfettered access to their credit reports. It also provides other consumer rights when it comes to credit reports, including a consumer's right to limit who's allowed to see the credit report to those that have a permissible purpose, or legitimate reason, to do so. Permissible purpose is given when you apply for credit with a lender or otherwise grant someone access to the credit file. Plus, the law limits the amount of time a negative account item can remain on the report to seven years in most cases.

Under the FCRA, credit bureaus are prohibited from including false or erroneous data on a consumer's credit report. As such, consumers have the right to dispute errors and inaccurate information with the credit bureau. The bureau then has up to 30 days to investigate the claim, contact the reporter of that information, verify its accuracy and make corrections. By law, the bureau must give written results of the investigation to consumers. Along with the results, bureaus also include an updated copy of the credit report that shows the changes that were made.

In 2003, Congress passed the Fair and Accurate Credit Transactions Act, or FACTA, as an addendum to the Fair Credit Reporting Act. FACTA gives consumers the right to order one free credit report every year from the main credit bureaus: TransUnion, Experian and Equifax. FACTA required bureaus to create a one-stop location that allowed consumers to order the free reports. To comply with the law, the bureaus jointly created the Annual Credit Report website. This site allows consumers to order the free reports online. It also provides a toll-free number and mailing address if consumers would rather order the reports by phone or mail (see Resources).