The Fair Credit Reporting Act
Unfortunately,
credit problems are not only limited to our immediate ability
to manage our finances and make payments on time. If you were
past due on credit obligations and brought your account(s)
back to a current status, the damage that was done while you
were behind may follow you for a while. Being current on credit
obligations bodes well for you in that it demonstrates your
ability to afford to meet immediate obligations, but the creditors
are also interested in your "past track record" because they
fear that there may be a correlation between past history
and future expectancy. To remove derogatory information from
your credit, your credit often has to stand the test of time.
You can improve your credit by bringing your accounts current
and remaining current on your obligations. Staying current
on your obligations demonstrates that your finances are more
stable and that you can effectively manage your finances and
your debt. To understand the rules that govern how long information
can stay on your credit report you need to understand the
Fair Credit Reporting Act.
The Fair Credit Reporting Act
created rules that govern reporting of information as it appears
on credit reports. Initially, the parameters of reporting
guidelines in the Fair Debt Collection Practices Act were
vague. Most information could remain on a consumer's credit
report for approximately 7 years (Bankruptcy could be reported
for up to 10 years) but the limits of when the seven-year
period began and ended were not clearly defined. In 1996 the
Consumer Credit Reporting Reform Act was created to clarify
the credit reporting guidelines that are set forth in the
Fair Credit Reporting Act.
In accordance with the Fair
Credit Reporting Act, the following information that was reported
to a credit bureau on or after January 1, 1998 is not permitted
to appear on a consumer's credit report. Information that
was reported to a credit bureau earlier than January 1, 1998
may not be subject to the same requirements.
Bankruptcies
that date back more than 10 years from the date of entry of
the order of relief from or the date of adjudication.
Civil
suits, civil judgements, or records of arrest that date back
more than 7 years from the date of entry or that exceed the
statute of limitations.
Paid
liens that date back more than seven years from the date of
the report.
;Accounts
that were placed for collection or charged off which date
back more than seven years beginning 180 days after the last
payment was due prior to the account being turned over to
collections or charged off.
Any
other derogatory information other than records of conviction
for crimes that date back more than 7 years from the date
of the report.
The
above referenced guidelines are not applicable for any consumer
report to be used in connection with any of the following:
A
credit transaction involving or expected to involve a principal
amount of $150,000 or more.
Underwriting
life insurance, which may be expected to include a value of
$150,000 or more.
Pre-screening
for employment of any individual at a salary of $75,000 or
more.
Other
consumer reporting guidelines:
Bankruptcy
For
the protection of the consumer, consumer reports are required
to meet other guidelines. If the source that provides information
regarding a bankruptcy indicates what chapter was filed, the
reporting agency must include the chapter on the credit report.
Additionally, if a bankruptcy is withdrawn before "final judgment"
and the agency has received information confirming that it
was withdrawn, the agency must indicate it on the consumer
report.
Accounts
that are voluntarily closed by the consumer
When
including information that is relative to a consumers account
on a report, if an agency receives verification that the consumer
voluntarily closed the account, they are responsible for indicating
on the report, that the consumer voluntarily closed the account.
Disputes
An
agency is responsible for noting that there is a dispute over
information that is reported on a consumer report if the consumer
directly notifies the agency. It is the agency's responsibility
to investigate and record the status of the disputed information
or delete the information from the consumer report. There
is a 30-day time frame that begins on the day the agency receives
the formal notice of dispute from the consumer, during which
the investigation must be completed. If, during the course
of the investigation, the agency receives additional "relevant"
information pertaining to the dispute, they are responsible
for extending the investigation period for an additional 15
days. The agency does not have to provide a 15 day extension
if, during the initial 30 day period, it determines that the
information that a consumer has supplied to support their
dispute is "inaccurate," "incomplete," or unverifiable.
If,
after investigating the dispute, the agency determines that
the furnisher of the disputed information (creditor) provided
"inaccurate or incomplete," information, the agency must correct
the information as it is reported on the file, or delete the
incorrect information. If information is deleted as a result
of a dispute investigation and it is in excess of three days
since receiving notice of dispute from a client, the agency
must mail written notice to the consumer of the results of
the investigation within 5 business days. The written notice
has to include a statement that the investigation is complete
and a copy of the consumer report that reflects any changes
that resulted from the dispute investigation. It must also
include a notice advising that the consumer has the right
to add a statement to their file that disputes the "accuracy
and completeness of the information"(see consumer statement.)
The agency must provide a confirmation of the consumer's right
to have the agency provide notification to any person who
previously had received a copy of the incorrect report within
5 business days. Specifically, the agency must submit a copy
of the corrected report to any person who received the report
within two years prior for employment purposes, and to any
person who received the incorrect report "for any other purpose"
within six months prior to the correction. If the consumer
requests, the bureau is responsible for including a description
of the procedure that was used to determine the accuracy and
completeness of the information within 15 days after receiving
the request. If an agency deletes information as the result
of the dispute within three business days or less from the
day that the agency received a notice of dispute from a client,
they may notify the consumer by telephone of the deletion.
The
agency is responsible for reviewing all the "relevant information"
that a consumer provides but they can end the investigation
if the consumer does not provide enough information to support
their investigation. The agency may also terminate the investigation
if they "reasonably determine" that the dispute is "frivolous"
or "irrelevant" and they must notify the consumer within 5
days. The notification must include the reason for terminating
the investigation and it must identify information that is
required to investigate the dispute. When an agency provides
notification of the results of an investigation to a consumer,
they must include a notice that the consumer has the right
to request that the agency submit notification to other agencies
through an automated system that enables them to share information
with other bureaus.
Reinserting
previously deleted material
Information
that has previously been deleted from a report file may only
be re-added if the creditor who is reporting the information
"certifies" that the information to be re-added is "complete
and accurate." Within 5 days of the reinsertion of information,
the agency must notify the consumer in writing. The agency
is responsible for providing information identifying the party
that provided the information that lead to the reinsertion
of information on a report. The agency must also provide the
address and contact information for the party who provided
the information, and they must provide notification to the
consumer that the consumer has the right "to add a statement
disputing the accuracy and completeness of the disputed information."
Consumer reporting agencies are responsible for taking "reasonable
procedures to prevent the reappearance of information" that
has previously been deleted. Agencies that maintain files
on a nationwide basis must have an automated system that allows
parties who provided the information to the agency (creditor)
to be able to report "incomplete or inaccurate information,"
as determined by the investigation to other reporting agencies.
Your
right to include a consumer statement
If
you disputed information that appears on your credit report
and the credit bureau determines that you have not provided
enough information to warrant changing the report or deleting
the information, you are entitled to prepare a statement to
be added to your credit report. The statement must be limited
to 100 words. Preparing a statement will give you an opportunity
to fully explain the reason why you are disputing the information
despite the fact that you were unable to provide enough supporting
evidence to have the information changed or removed.
Guidelines
governing how creditors report information to the credit bureau(s)
They
cannot report information that they know is incorrect.
They cannot ignore information that contradicts information
that they have on file.
They must notify the credit bureau if a debtor disputes information
with them.
They must indicate when a consumer voluntarily closes an account.
They must investigate a consumer dispute within 30 days of
receiving notice.
