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The FCRA, or the Fair Credit Reporting Act, was brought into affect with a view to protect the rights of people who apply for credit accounts. The regulations of this act control the credit bureaus, which report the credit history of a person and also the financial institutions that provide credit accounts.

For a long time, banks and other lenders have practiced a much skewed method of deciding the credit worthiness of a person. The general view is that if a person holds a large amount of money in an account, he or she is eligible for a long credit line. This however, discriminates against people who may not have large amounts of cash due to poverty or individuals who are who are trying to establish themselves in society.

The Fair Credit Reporting Act requires these institutions to follow a standardized procedure while deciding the credit worthiness of a person. The first step that a lender has to take is to check the credit history. This will show the repaying habit of a person, and this is more important than how much money he or she already has in an account. Apart from this, the ability of a person to repay in the future can be determined by checking his or her income slips and proof of employment.

The act also safeguards people against erroneous credit reports. A lot of instances have been reported of credit reports, which wrongly state that a person has a string of bad credit lines when he or she has been diligent in paying all the dues in time. Such erroneous reports can seriously hamper the ability of a person to look for and secure cheap credit. The Fair Credit Reporting Act ensures that every individual has access to his or her credit report whenever desired. You are eligible for one free report from each of the three credit bureaus. Any additional reports will have to be paid for. As an individual, you must ensure that you check your credit reports frequently to ascertain whether or not there are any wrong entries in it.

If you still end up with bad credit due to your own misgivings, you can take recourse from the FCRA. It ensures that banks do not penalize you to an extent that you are not able to dig yourself out of the hole. The banks must study your income potential and repaying habit and take your case on an individual basis, before penalizing you for any given mistake.