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- Your credit report and credit history play an important role in managing your day-to-day finances as well as helping you make big financial moves, like buying a home.
- The FCRA makes it easier for you to monitor and repair your credit.
- It also ensures that you control who accesses your credit history.
You probably already know how bad your credit report and credit score can have on your financial life, for better or for worse. Unfortunately, the history of consumer credit and the history of legal protections for consumers do not quite match. Prior to the Fair Credit Reporting Act, which came into effect 52 years ago on October 26, 1970, there were no guarantees of fairness, accuracy or confidentiality regarding how credit bureaus credit were processing your financial information.
Thanks to the FCRA (which has been revised and expanded several times over the past 52 years), the three major credit bureaus – Experian, TransUnion and Equifax – must now comply with credit reporting regulations. Read on to find out some 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 exactly what you would expect. Have you ever applied for a new credit card and been refused? Don’t worry, it happens to the best of us, and for a variety of reasons. Your credit score may have been too low for the card you were looking for, or your credit utilization rate was too high, or you have a history of late payments on your credit cards. If you’ve been denied for new credit, you’ve likely received official notice from the creditor, in the form of a mailed letter or digital letter (if you already had an existing account with the company). ) detailing why you were rejected.
It’s part of the FCRA, and while rejection can sting, it’s a good thing you have access to information about why. This way you will know what to do differently in the future, like increase your credit score or reduce your credit card usage before applying for another new card.
2. The FCRA helps you monitor your credit
It is extremely important to stay on top of your important financial data, and monitoring your credit is an important part of that. To that end, it’s a good idea to check your credit report regularly to stay on top of accounts in your name. If you are about to take a big financial step, like to buy a house, you’ll be able to see what mortgage lenders find out about you and your credit history when you apply for a mortgage. Some shady companies will tell you that the only way to see your credit report is to pay for it, and thanks to the FCRA, that’s not true.
You can actually get your credit report from each of the three major credit bureaus for free per week through the end of 2023 on 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 of your credit will prevent scammers from opening new accounts in your name without your knowledge. You will need to remove the freeze in order to open new accounts yourself.
3. The FCRA helps you repair your credit
Since you have access to your credit report for free through the FCRA, you are in a better position to repair your credit if you need it. Scour your credit report with a fine-tooth comb and look for errors, such as accounts that aren’t yours or accounts that are flagged as overdue when they aren’t. Credit report errors are unfortunately very common; in 2021, a Consumer Reports survey found that a third of respondents had discovered them. If you 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 pre-screened credit offers. Whether you’re trying to get your credit back on track or just hate getting a ton of credit card offers in the mail every day (or both!), you can head over to OptOutPrescreen.com to remove your name from these mailing lists.
4. The FCRA helps you with all of your finances
Finally, the FCRA can be a great help for your finances in general. If you are looking for a new job and your potential new employer wants to perform a background check that includes a credit check, you must consent to this being done. You also have the right to be told if your credit score or history has been used to prevent you from receiving a job offer or a new insurance policy, as well as to be told which credit bureau provided the information.
Overall, the Fair Credit Reporting Act does a lot to make managing your finances easier. Before its adoption, it was much more difficult to be an individual consumer in this country. I am grateful for his passage and his provisions, and you should be too!
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