Credit reporting can often be the source of a lot of stress. The previous statement is especially true if you are currently battling bad credit or if there are errors on your credit reports. Even if the credit problems you are facing are not your fault, they can still make your life a lot harder than it needs to be. Being turned down for loans, paying higher interest rates, or putting down hefty deposits for financing and services is all par for the course when you are dealing with credit issues.
The good news is that you do have extensive rights when it comes to your credit reports. The credit reporting agencies, creditors, and debtors are not allowed to simply act as they deem fit when reporting information about you or disclosing your information to others. Instead, credit reporting is strictly regulated.
The primary federal law which deals with credit reporting is known as the Fair Credit Reporting Act (FCRA). You can thank the FCRA for giving you a lot of protections. Keep reading below to discover a few of the most important highlights which this law offers you in the way of safeguarding your credit.
Time Limits on Credit Reporting
Of course if you owe a legitimate bill then you should probably pay it if you are financially able to do so. Yet most people who are facing credit issues did not wind up in such a position purposefully. You probably did not take on a mountain of credit card debt, for example, with the intention of defrauding your credit card issuer and not paying your bill. Most of the time bad credit instead is a result of unfortunate circumstances or bad choices, but not premeditated dishonestly.
On the bright side even if you have messed up, past credit mistakes are not allowed to remain on your credit reports forever. Instead, most derogatory items are required to be removed from your reports after either 7 or 10 years. Here is a quick rundown of the credit reporting limitations you enjoy thanks to the FCRA.
The 7 Year Removal Crew
- Collection Accounts (Removal required after 7 years from the date of default on the original account.)
- Late Payments
- Judgments (Both Paid and Unpaid)
- Paid Tax Liens (Unpaid tax liens can remain forever.)
The 10 Year Removal Crew
- Chapter 7 Bankruptcy (Removal required 10 years from the date filed.)
- Chapter 13 Bankruptcy (Removal required 10 years from the date filed or 7 years from the date of discharge. In most cases Chapter 13 BKs remain for a full 10 years.)
Limited Access to Your Reports
The FCRA also dictates who is allowed to access your credit reports (sometimes with and sometimes without your permission). Your ex sister-in-law, for example, is not permitted to legally pull up a copy of your credit reports just because she feels like it. Companies who have “permissible purpose” to see your credit reports are outlined in detail under the FCRA. Here are a few of the most common examples of those who have the right to access your reports.
- Lenders (When you fill out a loan application)
- Insurance Companies (When you apply for a policy)
- Employers (Your written permission is required.)
- Anyone with a Court Order
- Others with a Legitimate Business Need to See Your Credit (Landlords, Service Providers, Etc.)
- Companies Who Intend to Send You a Firm Offer of Credit or Insurance (Think pre-approved credit card offers.)
The Right to See Your Own Credit Reports
Thanks to the FACTA amendment to the FCRA you are granted free access to all 3 of your credit reports annually. To claim these freebies simply visit AnnualCreditReport.com. Sadly, although these free reports have been available for more than a decade and a half, only about 4% of the reports are claimed on an annual basis. Staying aware of the information contained in your reports is an essential step to earning the great credit to which you aspire.
The Right to Dispute
Errors on credit reports happen quite often. In fact, according a study by the Federal Trade Commission, over 40 million mistakes were discovered on the credit reports of US consumers. Errors can include accounts which have been re-aged to remain on your credit longer than legally allowed, incorrect balances, incorrect late payments, accounts which you never opened, unauthorized credit inquiries, and the list goes on.
When mistakes or questionable items appear on your credit you have the right to dispute those items, thanks again to the FCRA. You can dispute the errors on your own or you can hire a pro to handle the dispute process for you. Either way, credit reporting mistakes should not be ignored as they may have the potential to damage your credit scores significantly.