We all know the importance of credit scores and their relevance with regard to any mortgage loan or auto loans, etc. Credit scores are prepared based on the diktats of the federal law and credit reporting agencies (CRA`s) have to gather and process information based on the same and cannot overrule the guidelines that are laid down. The Fair Credit Reporting Act (FCRA) is another such law that is a provision for consumer credit rights in the U.S.
The three Credit Reporting Agencies (CRA`s) also have certain responsibilities under the FCRA. As per the law CRA will have to provide information to the consumers with regard to their credit report while taking considerable measures to ensure the accuracy of the report. Consumers are also entitled to a free copy of the credit report every year. In case there are any discrepancies in the report the consumer can dispute the information on the report and the data that is taken off the report cannot be reinserted without providing the consumer a written notice within 5 days. CRA`s cannot retain negative information from the report for more than a period of seven years. However, bankruptcies can be reflected on the report for about 10 years after it is settled.
According to the rules laid down by the FRCA on the creditors, as well as they are considered the “information furnishers”, and they would include banks, financial institutions, card companies, auto finance companies, etc. These companies will have to provide the accurate information to the CRA`s. They have the responsibility of investigating the disputed information and errors must be rectified, and if they claim they are correct then they should give a written explanation supporting their claim. Consumers will have to be informed before the information is placed on their credit reports. All of this will have to happen within a 30-day period.
FCRA has also directed the agencies that use these credit reports (auto insurance, banks, card companies, etc.) to inform the customers in case of any adverse action, such as rejecting an application or any such action that is taken based on the credit report. The agency that provided the report will also have to be notified so the consumer can verify the same.
Hence it is always better to have good credit scores, although, studies have shown errors in the reporting it is still the only tool available to evaluate the credit worthiness of an individual.