You probably already know how much of an impact your credit report and credit score can have on your financial life, both for better and for worse. Unfortunately, the history of consumer credit and the history of legal protections for consumers don’t quite match up. Prior to the Fair Credit Reporting Act, which became law 52 years ago, on Oct. 26, 1970, there was no guarantee of fairness, accuracy, or privacy when it came to how credit bureaus dealt with your financial information.
Thanks to the FCRA (which has been revised and expanded several times in the last 52 years), the three major credit bureaus — Experian, TransUnion, and Equifax — now have to comply with regulations surrounding credit reporting. Read on to learn a few ways the FCRA helps you as a consumer.
1. The FCRA helps you apply for new credit
The first way the FCRA benefits you is just exactly what you’d expect. Have you ever applied for a new credit card and gotten a rejection? Don’t worry, it happens to the best of us, and for a variety of reasons. Perhaps your credit score was too low for the card you were targeting, or your credit utilization ratio was too high, or you have a history of making late payments on your credit cards. If you got turned down for new credit, you likely received an official notice from the creditor, in the form of a mailed letter or a digital letter (if you already had an existing account with the company) detailing why you were rejected.
This is part of the FCRA, and while rejection may sting, it’s a great thing that you have access to information about why. That way, you’ll know what to do differently in the future, like boosting your credit score or lowering your credit card usage before applying for another new card.
2. The FCRA helps you monitor your credit
It’s extremely important to stay on top of your important financial data, and monitoring your credit is a major part of that. To that end, it’s a good idea to check your credit report regularly so you can stay on top of accounts in your name. If you’re getting ready to make a big financial move, such as buying a home, you’ll be able to see what mortgage lenders will find out about you and your credit history when you apply for a mortgage. There are some shady companies that will tell you that the only way to see your credit report is to pay for it, and thanks to the FCRA, this is wrong.
You can actually get your credit report from each of the three major credit bureaus for free on a weekly basis through the end of 2023 at AnnualCreditReport.com. When it comes to your finances, knowledge is power. The FCRA also allows you to freeze your credit, making it inaccessible to any potential new creditors (although current companies you have credit with will be able to see your data). The internet has made identity theft more common, and freezing your credit will prevent scammers from opening new accounts in your name without your knowledge. You’ll have to remove the freeze to be able to open any new accounts yourself.
3. The FCRA helps you repair your credit
Since you have access to your credit report for free thanks to the FCRA, you are in a better position to repair your credit if you need to. Go through your credit report with a fine-tooth comb, and check for errors, such as accounts that don’t belong to you or accounts being reported as delinquent when they aren’t. Credit report errors are sadly very common; in 2021, a Consumer Reports survey found that a third of respondents discovered them. If you do find errors, you have the right to dispute them and have them removed from your report.
The FCRA also includes a provision allowing you to opt out of receiving prescreened credit offers. Whether you’re trying to get your credit back on track, or simply hate receiving a metric ton of credit card offers in the mail every day (or both!), you can go to OptOutPrescreen.com to get your name off these mailing lists.
4. The FCRA helps you with your finances as a whole
Finally, the FCRA can be a great help to your finances overall. If you’re looking for a new job, and your potential new employer wants to conduct a background check that includes a credit screening, you have to consent to have that performed. You also have the right to be informed if your credit score or history was used to disqualify you from receiving a job offer or a new insurance policy, as well as to be informed of which credit bureau supplied the information.
All in all, the Fair Credit Reporting Act does a lot to make it easier to manage your finances. Prior to its passage, it was a lot more difficult to be an individual consumer in this country. I’m grateful for its passage and provisions, and you should be, too!
