Credit report accuracy and access to credit

Federal Reserve Bulletin, Summer, 2004 by Robert B. Avery, Paul S. Calem, Glenn B. Canner

The FCRA also prescribes the responsibilities of the reporters and the agencies when a consumer challenges the accuracy of information in a credit record. Within thirty days after a dispute has been filed, a credit-reporting agency must remove or correct inaccurate, incomplete, or unverified information in a consumer's credit record. In addition, anyone using information in a credit report to take adverse action against a consumer (for example, denying a request for credit) must notify the consumer that the report has been used in the decision. Such consumers are entitled to free copies of their reports. (11)

Amendments to the FCRA--enacted December 4, 2003, as the Fair and Accurate Credit Transactions Act (FACT Act)--expand consumer access to credit reports and credit history scores and address issues of data accuracy and identity theft (see box "Provisions of the Fair and Accurate Credit Transactions Act of 2003"). The provisions also expand the duties of creditors to advise a consumer when, as a consequence of information in a credit report, the consumer is offered credit on terms materially less favorable than those made available to most other customers. For the most part, the amendments will become effective at the end of 2004.

Provisions of the Fair and Accurate Credit
Transactions Act of 2003

The Fair and Accurate Credit Transactions Act of 2003
amended the Fair Credit Reporting Act in several ways.
The amendments, known collectively as the FACT Act,
seek to (1) improve the use of credit information and give
consumers greater access to such information, (2) prevent
identity theft and facilitate credit history restitution,
(3) enhance the accuracy of consumer report information,
(4) limit the sharing and use of medical information in
the financial system, and (5) improve financial literacy
and education.

The amendments that address the use and availability
of credit information provide the following consumer
rights and protections:

* The right to obtain a free copy of a consumer
report. A consumer may request a free credit report once
a year from each of the national credit-reporting agencies,
and each agency must establish a toll-free telephone
number to receive the requests. A consumer may also
obtain a credit history score and related information from
each agency for a "fair and reasonable" fee. For a given
credit history score, related information includes the
range of possible scores under the model used to produce
the score, a list of the key factors (not to exceed four) that
adversely affected the score, the date the score was
established, and the name of the entity that provided the
score.

* The right to be told when, as a result of negative
information in a credit report, a creditor has offered
a consumer credit on terms that are materially less
favorable than those offered to most other consumers.
At the time of notification, the creditor must provide a
statement that explains the consumer's right to obtain a
free credit report from a credit-reporting agency and that
provides contact information for obtaining the report (as
of this writing, the rules for implementing this provision
were not yet final).

* Protection against faulty reporting of credit record
data. Federal supervisors of financial institutions must
establish and maintain guidelines regarding the accuracy
and integrity of the information that data reporters submit
to credit-reporting agencies. In certain circumstances, a
data reporter must reinvestigate a dispute involving the
information it reported.