The Fair Credit Reporting Act (FCRA) is a federal law that controls how consumer credit information is collected, used, and shared. Its primary goal is to ensure the accuracy, fairness, and privacy of the information in your credit report.
For consumers, the FCRA protects their financial reputation. Your credit report determines whether you can rent an apartment, buy a house, get a job, and even how much you pay for car insurance. Without these rules, mistakes could ruin your credit score, and there wouldn’t be a clear way to fix them.
Here, you will learn what your rights are, how long negative marks stay on your record, and how to fix errors if you find them. Understanding your credit rights helps you protect your financial health and prepare for major milestones, including buying or refinancing a home.
The purpose of the Fair Credit Reporting Act (FCRA)
The core purpose of the FCRA is to promote the accuracy, fairness, and privacy of consumer information in the reporting system. Before this law, credit bureaus worked with little oversight, and a simple error could significantly hurt a person’s credit with no recourse.
The FCRA established a legal framework based on three main pillars:
Accuracy
The law mandates that Consumer Reporting Agencies (CRAs) and data furnishers (like banks and credit card companies) must follow reasonable procedures to ensure maximum accuracy of the information they report. If you spot a mistake, you have the right to dispute it, and the bureau must investigate your claim.
Fairness
Fairness under the FCRA means that consumers should be judged on relevant, up-to-date information, and everyone should have equal access to the dispute process. The law prevents outdated information from staying on your report forever (most negative items fall off in 7 to 10 years).
Also, furnishers must report data consistently, ensuring one person isn’t penalized differently than another for the same financial behavior.
Privacy
Your credit report contains plenty of sensitive data, from your Social Security number to your address history and debt levels. The FCRA strictly limits who can access this information.
First, not everyone can look up your report. A person or company must have a “permissible purpose” — like a loan application or insurance underwriting. Also, for inquiries such as employment background checks, the user must obtain your written permission first.
In short, the FCRA prevents inaccurate, outdated, or improperly shared information from harming your financial life.
What does the FCRA do? A breakdown of key protections
The legal text of the FCRA is pretty packed with jargon, but your practical rights are straightforward. These protections give you control and visibility over your financial profile.[1]
- Right to a free annual credit report: You don’t have to pay to see your own data. Here, you can request your official free copies from each CRA to ensure all info is correct.
- Right to dispute inaccurate items: You can challenge any error or outdated information. The CRA must investigate your request and update your credit report if it has inaccuracies.
- Right to security freezes: You can lock your credit report for free to prevent identity theft. In this situation, you’d have to give express authorization to CRA before they release information in your credit report.
- Right to free fraud alert: If you have an alert placed on your file, it warns potential lenders to take an extra step and verify your identity. Victims of identity theft are entitled to a free 7-year fraud alert.
- Right to opt out of prescreened credit offers: You can remove your name and contact info from lists used by creditors and insurers to send junk mail offers.
- Right to privacy in employment checks: Employers cannot check your report without your written consent.
- Right to accurate specialty reports: The FCRA also applies to specialty agencies that track checking accounts, medical records, and rental history.
- Right to know your credit score: You can access a free copy of your credit report and your credit score from each CRA.
- Right to be notified if info in your report is used against you: If a bank or a landlord rejects your application because of your report, they must tell you and give your contact details to the bureau they used.
- Limits on how long negative items can be reported: Negative information cannot stay on your report indefinitely. The law sets strict time limits for reporting adverse items.
If you’re looking to buy a home, understanding these rights is crucial. For example, it ensures you aren’t penalized for errors in your credit report when applying for a mortgage.
Who must follow the FCRA?
Compliance with the FCRA is not limited to just the credit bureaus. It applies to a wide ecosystem of financial institutions and users, grouped into three categories.
1. Consumer reporting agencies (CRAs)
These companies collect and sell consumers’ information to other businesses. The three largest national consumer reporting agencies are Equifax, Experian, and TransUnion.
There are also specialty CRAs that focus on specific industries, such as rental or medical history. Examples include ChexSystems (banking history), LexisNexis (public records), or TransUnion SmartMove (rental history).
2. Furnishers of information
Furnishers are the companies that send data to the CRAs. Common examples include credit card issuers and banks, lenders, and collection agencies.
It is their responsibility to provide accurate information. If you dispute an item, they must investigate and report the results. And if the investigation finds inaccurate information, a furnisher must update it across all bureaus where it was reported.[2]
3. Users of information
Users are businesses that rely on credit report information to make decisions. For example, a bank running a credit check to issue you a credit card, or a landlord who wants to review your background and rental history.
First, they must verify that they have a “permissible purpose” to pull your file. If they decline your application because of your credit, they must provide an Adverse Action Notice. This notice must include the name of the CRA that provided the report and instructions on how to get a free copy and dispute any errors.
How long can negative information stay on your credit report?
One of the important aspects of the FCRA is the “expiration date” it places on negative financial history. Once these deadlines pass, the information is deleted from your report automatically.
It’s worth noting that while some items can damage your credit by as much as 100 points or more, their impact usually decreases over time.
| Item | How long it stays | Description |
|---|---|---|
| Late payments | Up to 7 years | Consecutive late payments removed after 7 years from date of first missed payment |
| Collections/charge-offs | Up to 7 years | Clock usually starts after 180 days of nonpayment; paid charge-off still appears on your report |
| Repossessions | Up to 7 years | Lender claims property after a default on a loan; counts from date of first missed payment |
| Foreclosures | Up to 7 years | Counts from date of first missed payment |
| Chapter 7 bankruptcy (liquidation bankruptcy) | Up to 10 years | Counts from date of bankruptcy filing |
| Chapter 13 bankruptcy (reorganization bankruptcy) | Up to 7 years | Counts from date of bankruptcy filing |
| Judgments (where allowed) | Usually 7 years | Remain for 7 years or for the state statute of limitations (whichever is longer); most judgments are no longer reported by the three largest CRAs, but they are still visible in public records[3] |
| Tax liens | Used to stay 7 years if paid and 10 years if unpaid | Most tax liens are no longer reported by the three largest CRAs, but they are still visible in records[4] |
| Criminal convictions | Indefinite | Can technically stay indefinitely, though many agencies remove them after 7 years; timeframe could depend on state and local laws and type of offense |
| Hard inquiries | Up to 2 years | Impact on your score is minimal after 12 months; rate shopping for loans treated as one inquiry |
| Soft inquiries | Not shown to lenders | Visible only to the consumer; don’t hurt your credit score |
| Positive accounts | Up to 10 years | Accounts closed in good standing stay for 10 years |
How the FCRA helps when buying, refinancing, or renting a home
Mortgage lenders and landlords rely heavily on the FICO scores generated from your credit reports. A single error, like a paid-off loan showing as a collection, can drop your score by dozens of points.
The FCRA lets you fix those errors before you apply, ensuring fair terms based on your actual history. What’s more, by enforcing the removal of old negative items (that missed credit card payment 15 years ago in your college youth), the FCRA ensures lenders see a current picture of your financial responsibility, not your distant past.
For renters, the FCRA allows you to dispute incorrect eviction records or any background check errors that might otherwise cost you that one rental you fell in love with.
Finally, rights like fraud alerts or security freezes prevent criminals from taking out a mortgage or HELOC in your name.
If you’re planning to buy, sell, or refinance, accurate credit reporting is essential. Clever can connect you with vetted real estate professionals who can help you understand your credit and your options.
How to dispute credit report errors under the FCRA
Did you discover an error in your credit report right before applying for a mortgage? Don’t panic; the FCRA provides a clear path to fix it.
Step 1: Get your reports
Use your rights to check your reports in advance. Go to annualcreditreport.com for the official records from Experian, Equifax, and TransUnion. Don’t use a third-party “free score” app for this; opt for the official report.
Step 2: Identify the errors
Look for accounts you don’t recognize, late payments that were actually on time, or incorrect balances.
Step 3: File a dispute
You can do this online through each bureau’s dispute portal, by phone, or, for a better paper trail, by certified mail. If possible, include copies of any documents that support your case.
Step 4: Wait for investigation
Furnishers must investigate and respond to you within 30 days from the day they received your request.
Step 5: Check the result
If the furnisher cannot verify the debt, they must update the information and inform all CRAs of the change. If they refuse, you can contact the CRA again and ask them to add a consumer statement to your file.
Who enforces the FCRA?
The FCRA is a federal law, but its enforcement is a shared responsibility between a few entities.
- Consumer Financial Protection Bureau (CFPB): This is a primary federal regulator. It sets the rules and can sue companies for widespread violations.
- Federal Trade Commission (FTC): The FTC enforces the FCRA by policing data privacy, monitoring CRAs, and enforcing data security rules.
- State attorneys general: States can start investigations based on consumer complaints and file lawsuits against companies for violations.
- Private right of action: Most importantly, the FCRA gives you (the consumer) the right to sue if the CRA or furnisher willfully violates your rights. For example, if your valid dispute was ignored or your credit was pulled without permission, you can sue them in civil court for damages.
The bottom line
The Fair Credit Reporting Act is a financial shield. It ensures the data lenders use is accurate, fair, and private. Whether correcting a mistake or locking your file against potential fraud, these rights give you the power to protect yourself.
If you want to make a move in the housing market, get advice before you buy or refinance. Clever offers a 100% free, no-obligation service to introduce you to top-rated local agents who can advise you on everything real estate, from finding the right place to improving your credit in advance. Take a short quiz to get started now.
FAQ
What is the purpose of the Fair Credit Reporting Act?
The purpose of the Fair Credit Reporting Act (FCRA) is to ensure the accuracy, fairness, and privacy of information in consumer reports (such as credit reports or employment background reports).
What does the FCRA protect?
The FCRA protects consumers from misinformation and privacy invasions. It ensures you, as a consumer, can access your own data, dispute inaccurate information, and limit access to your file.
What are consumers’ rights under the FCRA?
Key consumer rights include the right to a free report once every 12 months, the right to request a credit score, the right to dispute inaccurate or incomplete information, and the right to place a “security freeze” on your report.
Who enforces the FCRA?
The FCRA is enforced mainly by the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) at the federal level. Additionally, state governments can also enforce it.
How long can negative items stay on your report?
Generally, negative information like late payments, foreclosures, and collections can stay on your report for 7 years. Bankruptcy can stay on your report for 7 to 10 years, depending on its type. Hard inquiries remain for up to 2 years.
Does the FCRA help prevent identity theft?
Yes, the FCRA helps prevent identity theft. It makes it possible thanks to giving consumers rights like placing fraud alerts or security freezes on their credit files. It also provides certain rights for victims to dispute fraudulent information and have it removed from their files.
What’s the difference between FCRA and FACTA?
The FCRA is the original law governing the credit reporting industry and establishing the rights of accuracy and privacy. The Fair and Accurate Credit Transactions Act (FACTA) is an amendment to the FCRA that focuses heavily on identity theft protection.