A: Under the Fair Credit Reporting Act (FCRA), enforced by the Federal Trade Commission, credit-reporting agencies (credit bureaus) are permitted to collect information from lenders on your credit history so long as they abide by FCRA rules regarding the release of such information.
While these agencies do not require a federal or state license to operate, they are tightly regulated by the Federal Trade Commission. The FCRA also puts limits on how they can handle your personal credit information. For example, they can only disclose it to:
- Creditors who are considering granting you credit.
- Employers who are considering you for employment.
- Insurers who are considering providing you with coverage.
- Government agencies that are reviewing your financial status.
- Potential landlords or others with a legitimate need for the information.
The three national credit-reporting agencies -- Equifax, TransUnion and Experian -- play a vital role in the country’s financial system. By maintaining databases of credit information on millions of consumers, they allow lenders quick, one-stop access to the information they need to consider loan applications. Without these agencies, lenders would have to contact your previous creditors individually every time they granted you a loan. This system vastly speeds up the loan approval process for consumers.
Credit agencies keep a file containing your basic personal information, as well as data on your accounts with banks, retailers and other creditors, and events such as bankruptcies. They use this information to compile a credit report and to calculate a credit score assessing your credit risk.
Some consumers have encountered problems with inaccuracies in their credit reports. To help make sure the reporting agencies are keeping valid information, the government requires them to provide you with a free copy of your credit report once every year, on request. They must investigate any information you dispute and change any inaccuracies in your file. However, each agency keeps a different set of information, so it’s best to request a report from all three.
Anyone who refuses you credit, insurance, or employment, or takes any other adverse action against you on the basis of a credit report must tell you which agency supplied the information so you can make inquiries. Safeguards such as these help to ensure the credit-reporting agencies don’t abuse their access to your private information.