Loading the player...

What is the 'Fair Credit Reporting Act (FCRA)'

The Fair Credit Reporting Act (FCRA) is the act that regulates the collection of credit information and the access to credit reports. It was passed in 1970 to ensure fairness, accuracy and privacy of the personal information contained in the files of the credit reporting agencies.

BREAKING DOWN 'Fair Credit Reporting Act (FCRA)'

The Fair Credit Reporting Act is the primary legislation that governs all activities pertaining to the reporting of credit information for consumers. Two key areas of focus for the Act include the protection of credit reporting information and the standards for how credit information is recorded. As designated by the FCRA, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau are the two government agencies charged with overseeing and enforcing the provisions of the Act. The entire FCRA can be found in United States Code Title 15, Section 1681.

Permissible Purposes for Obtaining Credit Reports

Section 604 of the Act discusses permissible purposes for obtaining a consumer’s credit report. Primary purposes allowing for a credit report to be released from a credit reporting agency include the review of a borrower’s credit profile for a credit application, the release of a credit report for a background check and the request of a credit report by the consumer. Other permissible purposes include an order from the court, business dealings and child support considerations. The FCRA also has detailed requirements outlining the disclosure and notification policies that must be followed by entities seeking a consumer’s credit report for various reasons.

Standards for Reporting Credit Information

The FCRA also lays out clear standards for the information that should be included on a credit report and the length of time that entries can remain on a credit report. Credit reporting agencies establish a trade line for each credit account that is opened by a consumer. Any information pertaining to a consumer that is reported by a creditor is recorded by trade line. Additional information beyond standard credit account trade lines may also include the reporting of a child support liability, tax liability or bankruptcy filing.

Certain reported items will be released after a specified amount of time. Most adversely reported items remain on a consumer’s credit report for seven years. Certain instances such as bankruptcy can remain on a credit report for ten years.

Other Important Rights Designated by the FCRA

Under the FCRA, consumers have the right to:

  • Know what's in their file.
  • Free file disclosure once per year from each of the major credit bureaus.
  • Verify accuracy of report when required for employment purposes.
  • Notification if a file has been used against them.
  • Dispute and correct information that is incomplete or inaccurate.
  • Remove outdated, negative information (seven years old or 10 years in the case of bankruptcy).
  1. Credit Limit

    Credit limit is the amount of credit that a financial institution ...
  2. Credit Rating

    A credit rating is an assessment of the creditworthiness of a ...
  3. Trade Credit

    A trade credit is an agreement in which a customer can purchase ...
  4. Credit Control

    Credit control includes the strategies a business uses to encourage ...
  5. Good Credit

    A qualification of an individual's credit history that indicates ...
  6. Credit Score

    A credit score is a number ranging from 300-850 that depicts ...
Related Articles
  1. Personal Finance

    Spotting Credit-Repair Scams

    Credit repair scams are common in today's debt-reliant world. Don't be a victim!
  2. Small Business

    How To Increase Your Appeal To Prospective Lenders

    Making a business eligible for loans/credit cards at the best possible rates requires crafting an excellent credit profile through the smart use of credit.
  3. Personal Finance

    How to Read Your Consumer Credit Report

    Learning how to read your consumer credit report is vital, as it includes important information about your credit history.
  4. Personal Finance

    How To Dispute Errors On Your Credit Report

    It just takes some time and effort to rebound from a nasty case of "credit rejection shock."
  5. Personal Finance

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  6. Personal Finance

    5 Tax Credits You Shouldn't Miss

    If you're not taking advantage of these deductions, you could be missing out on tax savings.
  7. Personal Finance

    Why You Should Improve Your Credit and How to Do It

    With credit playing a big role in many financial decisions, it is important to maintain good credit.
  8. Personal Finance

    There's Help Coming For Your Credit Report

    Soon, there will be another body protecting consumers when it comes to credit scores. Here are some new things to know about getting a credit report in the future.
  9. Personal Finance

    Fixing Your Credit Score: A Do It Yourself Guide

    Following these five steps can go a long way toward repairing a low score.
  10. Personal Finance

    How To Establish A Credit History

    Can't get a credit card without a credit history, and can't get a history without a card? Break the Catch-22.
  1. What’s the difference between a consumer disclosure and a credit report?

    Find out why consumer disclosures and credit reports are considered different documents, even though they contain similar ... Read Answer >>
  2. What's the difference between credit reports and investigative consumer reports?

    Learn about the major differences between two types of risk-evaluation reports: consumer credit reports and investigative ... Read Answer >>
  3. How do I get my free credit report and score from each credit bureau?

    Learn how to obtain copies of your credit report for free from the three credit bureaus and where you might find your credit ... Read Answer >>
  4. Is it possible to have a credit limit that's too high?

    Avoid these pitfalls when working with high credit limits, and learn how to increase your credit score by increasing your ... Read Answer >>
Trading Center