The following information is provided by the Federal Trade Commission.
If you’ve ever applied for a credit card, a personal loan, or insurance, there’s a file about you. This file is known as your credit report. It is chock full of information on where you live, how you pay your bills, and whether you’ve been sued or arrested, or have filed for bankruptcy. Credit reporting companies sell the information in your report to creditors, insurers, employers, and other businesses with a legitimate need for it. They use the information to evaluate your applications for credit, insurance, employment, or a lease.
Having a good credit report means it will be easier for you to get loans and lower interest rates. Lower interest rates usually translate into smaller monthly payments.
Nevertheless, newspapers, radio, TV, and the Internet are filled with ads for companies and services that promise to erase accurate negative information in your credit report in exchange for a fee. The scam artists who run these ads not only don’t deliver — they can’t deliver. Only time, a deliberate effort, and a plan to repay your bills will improve your credit as it’s detailed in your credit report.
The Federal Trade Commission (FTC), the nation’s consumer protection agency, has written this booklet to help explain how to build a better credit report. It has six sections:
Section 1: Explains your rights under the Fair Credit Reporting Act and the Fair and Accurate Credit Transactions Act.
Section 2: Tells how you can legally improve your credit report.
Section 3: Offers tips on dealing with debt.
Section 4: Cautions about credit-related scams and how to avoid them.
Section 5: Offers information about identity theft.
Section 6: Lists resources for additional information.
The Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness, and privacy of information in the files of the nation’s credit reporting companies. The FTC enforces the FCRA with respect to these companies. Recent amendments to the FCRA expand consumer rights and place additional requirements on credit reporting companies. Businesses that provide information about consumers to credit reporting companies and businesses that use credit reports also have new responsibilities under the law.
Here are answers to some of the questions consumers have asked the FTC about consumer reports and credit reporting companies
Q. Do I have a right to know what’s in my report?
A. You have the right to know what’s in your report, but you have to ask for the information. The credit reporting company must tell you everything in your report, and give you a list of everyone who has requested your report within the past year — or the past two years if the requests were related to employment.
Q. What type of information do credit reporting companies collect and sell?
A. Credit reporting companies collect and sell four basic types of information:
- Identification and employment information: Your name, birth date, Social Security number, employer, and spouse’s name are noted routinely. The credit reporting company also may provide information about your employment history, home ownership, income, and previous address, if a creditor asks.
- Payment history: Your accounts with different creditors are listed, showing how much credit has been extended and whether you’ve paid on time. Related events, such as the referral of an overdue account to a collection agency, also may be noted.
- Inquiries: Credit reporting companies must maintain a record of all creditors who have asked for your credit history within the past year, and a record of individuals or businesses that have asked for your credit history for employment purposes for the past two years.
- Public record information: Events that are a matter of public record, such as bankruptcies, foreclosures, or tax liens, may appear in your report.
Q. Is there a charge for my report?
A. Under the Free File Disclosure Rule of the Fair and Accurate Credit Transactions Act (FACT Act), each of the nationwide credit reporting companies — Equifax, Experian, and TransUnion — is required to provide you with a free copy of your credit report once every 12 months, if you ask for it.
Q: How do I order my free report?
annualcreditreport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. The form is at the back of this brochure; or you can print it from ftc.gov/credit. Do not contact the three nationwide credit reporting companies individually. You may order your free annual reports from each of the credit reporting companies at the same time, or you can order them one at a time. The law allows you to order one free copy from each of the nationwide credit reporting companies every 12 months.
Q: What information do I have to provide to get my free report?
A: You need to provide your name, address, Social Security number, and date of birth. If you have moved in the last two years, you may have to provide your previous address. To maintain the security of your file, each nationwide credit reporting company may ask you for some information that only you would know, like the amount of your monthly mortgage payment. Each company may ask you for different information because the information each has in your file may come from different sources.
Still, annualcreditreport.com is the only authorized online source for your free annual credit report from the three nationwide credit reporting companies. Neither the website nor the companies will call you first to ask for personal information or send you an email asking for personal information. If you get a phone call or an email — or see a pop-up ad — claiming it’s from annualcreditreport.com (or any of the three nationwide credit reporting companies), it’s probably a scam. Don’t reply or click on any link in the message. Instead, forward any email that claims to be from annualcreditreport.com (or any of the three credit reporting companies) to firstname.lastname@example.org, the FTC’s database of deceptive spam.
Q: Are there other situations where I might be eligible for a free report?
A: Under federal law, you’re entitled to a free report if a company takes adverse action against you, such as denying your application for credit, insurance, or employment, and you ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the credit reporting company. You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft. Otherwise, any of the three credit reporting companies may charge you up to $10.50 for another copy of your report within a 12-month period.
To buy a copy of your report, contact:
Under state law, consumers in Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey, and Vermont already have free access to their credit reports.
For more information, see Your Access to Free Credit Reports at ftc.gov/credit.
Q. What is a credit score, and how does it affect my ability to get credit?
A: Credit scoring is a system creditors use to help determine whether to give you credit, and how much to charge you for it.
Information about you and your credit experiences, like your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical formula, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor. A total number of points — a credit score — helps predict how creditworthy you are; that is, how likely it is that you will repay a loan and make the payments on time. Generally, consumers who are good credit risks have higher credit scores.
You can get your credit score from the three nationwide credit reporting companies, but you will have to pay a fee for it. Many other companies also offer credit scores for sale alone or as part of a package of products.
For more information, see Need Credit or Insurance? Your Credit Score Helps Determine What You’ll Pay at ftc.gov/credit.
Improving Your Credit Report
Under the FCRA, both the credit reporting company and the information provider (the person, company, or organization that provides information about you to a credit reporting company) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under the FCRA, contact the credit reporting company and the information provider if you see inaccurate or incomplete information.
1. Tell the credit reporting company, in writing, what information you think is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report that you dispute, state the facts and explain why you dispute the information, and request that the information be deleted or corrected. You may want to enclose a copy of your report with the items in question circled. Your letter may look something like the one on page 8. Send your letter by certified mail, return receipt requested, so you can document what the credit reporting company received. Keep copies of your dispute letter and enclosures.
Credit reporting companies must investigate the items in question — usually within 30 days — unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. After the information provider receives notice of a dispute from the credit reporting company, it must investigate, review the relevant information, and report the results back to the credit reporting company. If the information provider finds the disputed information is inaccurate, it must notify all three nationwide credit reporting companies so they can correct the information in your file.
When the investigation is complete, the credit reporting company must give you the written results and a free copy of your report if the dispute results in a change. (This free report does not count as your annual free report under the FACT Act.) If an item is changed or deleted, the credit reporting company cannot put the disputed information back in your file unless the information provider verifies that the information is, indeed, accurate and complete. The credit reporting company also must send you written notice that includes the name, address, and phone number of the information provider.
If you request, the credit reporting company must send notices of any correction to anyone who received your report in the past six months. A corrected copy of your report can be sent to anyone who received a copy during the past two years for employment purposes.
If an investigation doesn’t resolve your dispute with the credit reporting company, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the credit reporting company to provide your statement to anyone who received a copy of your report in the recent past. Expect to pay a fee for this service.
2. Tell the creditor or other information provider, in writing, that you dispute an item. Be sure to include copies (NOT originals) of documents that support your position. Many providers specify an address for disputes. If the provider reports the item to a credit reporting company, it must include a notice of your dispute. And if you are correct — that is, if the information is found to be inaccurate — the information provider may not report it again.
Sample Dispute Letter
Your City, State, Zip CodeComplaint Department
Name of Company
City, State, Zip CodeDear Sir or Madam:
I am writing to dispute the following information in my file. The items I dispute also are circled on the attached copy of the report I received.This ite