Credit Insider Guide to three laws of credit repair
There is more to credit than the Fair Credit Reporting Act.
Legal basis: the FCRA.The Fair Credit Reporting Act is where credit report repair begins. Unfortunately, as I suggested before, some so-called credit repair organizations believe this is where it ends as well.
Overly quoted but equally underutilized, the FCRA regulates how credit reporting agencies (in plain talk, the "credit bureaus") treat consumers. Before this law was enacted and fully implemented in the early 1970s, such bureaus were essentially unregulated and could do just about whatever they wanted.
During the pre-FCRA days, for example, one of the nation's oldest credit bureaus routinely contracted with commercial "greeters," whose representatives would knock on a new neighbor's door, make careful notes about their ethnicity, whether anyone smelled of alcohol, whether the family appeared sufficiently employed, subjective notes about perceived stability, and other such things. Following a hearty welcome, a quicker goodbye, and a basket of coupons, such greeters would then write up a little report and send it back to the grand old company.
Needless to say, such methods were outlawed by the FCRA, and race, religion, and subjective personal observations could no longer be included within ones credit bureau file. Moreover, consumers were finally allowed access to their credit reports, which up until the FCRA was enacted were practically never disclosed to ordinary citizens who might otherwise suffer financial consequences for decades due to incorrect and unfair information within those secret files.
- Ensures that consumers can acquire their consumer credit reports at a reasonable price (or for free under certain circumstances), and severely restricts "investigative consumer reports" (i.e., friendly ladies bearing coupons and checklists, for example).
- Regulates who has "permissible purpose" to acquire a consumer's report. (You'll hear credit mavens refer to "permissible purpose" when discussing INQUIRIES. An inquiry, put simply, is the notation made in a credit file when a potential creditor, employer, or insurer sneaks a peek at it. Successful small claims court lawsuits have been brought by consumers against those who acquire credit files without a permissible purpose.
- Delineates the running reporting periods for information on credit reports -- generally 7 years for most items except for bankruptcy related notations which can remain for 10 years. Keep in mind that these are MAXIMUM LIMITS. The FCRA does not stipulate a MINIMUM amount of time something must remain on a consumer's credit file. In this respect, the FCRA exists to protect you against something remaining on your report forever, but no law requires that private companies tattletale on you for any minimum length of time at all. To this end, it's worth remembering that credit reports are certainly not official government documents, and credit bureaus are not officially sanctioned agencies.
- Details how a credit bureau must handle consumer complaints. The hypersimplified version: When a consumer disputes a credit file item, the bureau must note within the file that the item is disputed and begin an investigation which must be completed within a "reasonable" amount of time, a community standard which has been almost universally held to be 30 days. The bureau must then inform the consumer of the action that was taken -- either verified (the item remains as is), modified (certain aspects of the tradeline have been revised), deleted (the item is removed from the file), or deemed "frivolous" (an awful provision that allows the bureau to basically say you're not being serious). The consumer may then exercise other rights if desired.
If some of this is beginning to seem complicated, don't despair. There are experts who can assist. Moreover, a quick Google search (yes, I do enjoy uncompensated commercial plugs) will reveal several discussion boards where consumer law junkies stand ready to answer questions. Unfortunately, this is only a pamphlet, and other Federal statutes beckon.