The Fair Credit Reporting Act was turned into a federal law in 1970.
Since then, it’s been protecting consumers and their credit, but what exactly is it, and how does it work? There are actually a lot more benefits from this act that you might not realize.
Keep reading to discover more about how this act affects you and your loan application.
The FCRA is designed to protect your credit information. This law dictates what agencies can collect, access, use, and even share your credit information. In general, the consumers’ credit can’t be shared with anyone unless it falls under one of the reasons listed in this law.
For example, if you’re applying for a loan or a credit card, the business can ask for your credit since that is listed under the FCRA. A landlord can also check your credit report to see if you’re applying for an apartment.
Businesses will also be able to access it if they’re an employer, creditor, insurer, lender, landlord, or other business that has a legitimate reason for pulling your credit report. If they don’t fall under the guidelines listed in the FCRA, then they won’t get access to your information.
The FCRA is designed to help consumers understand who has access to their credit reports, but it also helps their information stay more secure.
There are three major credit bureaus that will have all of your credit reports: Equifax, TransUnion, and Experian. However, there are other minor organizations that might collect and use your information, like your bank.
Whenever you apply for a loan or another credit card, the company will check your credit history and score to see if you’re eligible for one of their loans. Your credit history will also affect your annual percentage rate on the credit card and loan.
In some states, employers will also check your credit report before they hire you. Some insurance companies will also check your credit report before they offer you any coverage.
The FCRA is the main federal law that controls who can collect and report your credit information. It also details how long people can keep and share that data, including the consumers.
The Consumer Financial Protection Bureau and the Federal Trade Commission are the two agencies that enforce this law. However, many states have created their own laws that are related to credit reporting as well.
The three main companies that we mention above collect your information, and then they compile reports that can be distributed to other agencies who are interested in your history.
This law is actually very important in protecting your information. For example, if your loan is denied for any reason, you need to be informed if the information is the reason.
You have to be told if there was an adverse action taken, and they’ll also need to give you the phone number, address, and a number of the agency that gave you the information.
With this act, you’ll also get the right to access your credit report at any point in time. This can be helpful to pull before you apply for a loan, so you know what your chances are of actually being approved for a loan.
You get one free credit report from the credit bureaus each year. If you’ve already used your free report, then if you think you’re a victim of identity theft or unemployed, you’ll also get access to a free report.
You’re also allowed to dispute any issues with your credit report. This is why it’s important to pull it before applying for a loan. If there’s an error on the report that’s hurting your credit score, you can get it removed and improve your credit score quickly to better your chances of getting the loan.
You’ll also be able to request your credit score. The credit score is what the lender will use to determine if you’re a trustworthy borrower.
Depending on the type of lender, you may be able to see an estimate for your credit score, but you can get an accurate idea when you check with the credit bureaus.
Lastly, you’ll also be able to put security free on your report. If you have done this in the past to protect your credit, then you’ll need to unfreeze it when applying for a loan.
At the end of the day, this act doesn’t really directly affect your loan application, but it can give you the tools you need to improve your chances of successfully getting the loan.
The lender will need to pull your credit report, and they’ll have to follow the laws set forth by this act. You’ll need to give the company or lender who’ll give you the loan special permission to access your credit report.
However, keep in mind that because of this law, pulling your credit report will count as a hard inquiry. One hard inquiry won’t hurt your credit score too much, but if you do too many of them in a short timeframe, then it’ll start to affect your score.
These are only a few things to know about the Fair Credit Reporting Act, but it shouldn’t affect your chances of getting a loan.
Instead, it should only help you to have the right information and know your rights when applying.
If you’re interested in looking for the right loan, make sure you check out our website!