Under the Fair Credit Reporting Act (the Act), Congress intended to promote the accuracy and privacy of information in consumer credit reports.  The Act regulates consumer reporting agencies to maintain correct and complete files, but also mandates certain actions must be taken by the agencies in order to protect the consumer from falsely reported information.  

Although it is a good practice to review your credit reports at least once a year, it is an acute necessity for those facing financial difficulties or after emerging from a bankruptcy filing.  The Act can be utilized to clean the records and ensure that only correct information is reported.  Negative information on a person's credit report can dramatically decrease his or her credit score and continuously plague a borrower into the future.

According to the Act, you have a right to review your credit report and to have incorrect information corrected. Credit bureaus are required to maintain accurate information for the benefit of the creditor. Reports can be issued only to those with a legitimate business reason. These include creditors, employers, insurers, and government agencies reviewing the status for licensing or benefit purposes, or any third party for whom you request a report.

The duty to investigate disputed information from consumers is the responsibility of the credit reporting agency, and they must correct an error, or explain why the credit report is correct within thirty days of receipt of notice of a dispute.  Once a consumer identifies an error on a report, a notice of dispute should be sent to the reporting agency in writing immediately. The credit bureau is responsible for investigating and for changing or removing any incorrect data within such thirty day period. The source of the error must then notify all consumer reporting agencies where they sent information. If you are not satisfied with the correction, you have the right to add a brief statement (100 words or less) about the issue to your credit report. The statement should be a clarification, not an explanation, of credit problems.  The use of the Act in this manner is the most efficient to correct mistakes and improve the credit score.

Under the Act, a consumer may recover either actual damages or a minimum of $100 and a maximum of $1000 plus punitive damages and reasonable attorney's fees and costs for willful noncompliance with the Act. Further, recovery for a negligent violation is of actual damages, plus attorney's fees. A consumer may file suit in state or federal court to enforce the Act, and the statute of limitations is the earlier of two years from discovery and five years from the violation.

If your credit application is turned down because of an error on your report, the lender is required to provide you with the name and address of the credit bureau that issued the report. Then, you have thirty days to request a free copy from the bureau. The bureaus must disclose to you all information in the report, its source, and who has recently received the report.  Consumers are vested with the right to have the credit bureau re-issue corrected reports to lenders who received reports within the last six months, or to employers who received one in the past two years.

The Act further mandates certain disclosure requirements on the bureaus.  For instance, the agencies must provide access to the information in a credit report, as well as identify those who have requested the information recently. There is usually a charge for each report, unless you have been denied credit recently.  Each consumer is entitled to one free report a year if they certify in writing that: (1) they are unemployed and plan to look for a job within 60 days, (2) they are on welfare, or (3) the report is inaccurate due to fraud.

Given today's current economic environment, it can be a very beneficial exercise to review your credit report to ensure accuracy.  The strength of the credit score affects each consumer in myriad ways and steps should be taken to improve scores as the right of the consumer under the Act.