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Newspaper stories over the last several decades have repeatedly highlighted the problem of inaccurate information contained in credit reports. According to a 1998 study by the Public Interest Research Group, out of the credit reports surveyed, 29% contained serious errors that could result in the denial of credit, 70% contained mistakes or errors of some kind, 41% contained incorrect personal demographic identifying information, 20% were missing major credit cards, loans, mortgages, or other accounts that are critical to demonstrating consumer credit worthiness. In addition, the report found that it was difficult to obtain credit reports. 15% of total requests were never received by the consumers, despite repeated calls and/or letters. Of the consumers who did obtain their credit reports, at least 14% of them were forced to call back 3 or more times. 12% of consumers waited two weeks or longer to receive their report once they finished requesting it, and it took more than a month for one California man to receive his report.
Other past studies found that more than 3 in 5 consumers have negative information in their credit report, and nearly half of the studied reports contained errors. Some of the errors were serious enough to prevent the individual from qualifying for credit, serious errors like false delinquencies and judgments that simply don't belong to the consumer. Unfortunately, there was very little anyone could do to fix these problems.
To address this issue, and provide a remedy to consumers for poor record keeping on the part of the credit reporting agencies, the US Congress first passed the Fair Credit Reporting Act (FCRA) in 1971. It has, since then, been revised and refined several times, most recently in 1997 and again in 2003. The laws established by this act require the credit reporting agencies to remove all obsolete, inaccurate, irrelevant, outdated, misidentifying, incomplete, incorrect, erroneous, and misleading information from their credit reports. Specifically, if the completeness or accuracy of any item in a consumer's file at a credit reporting agency is disputed, the agency shall re-investigate free of charge and record the current status of the disputed information, or delete the item, before the end of the 30-day period beginning on the date on which the agency receives the notice of dispute.
Further, the credit reporting agency shall promptly provide notification of any dispute to anyone who provided any item of information in dispute. If an item is found to be inaccurate or incomplete or cannot be verified, the credit reporting agency shall promptly delete the item, or modify the item, as appropriate, and notify the consumer no later than 5 business days after the completion of the re-investigation.
The credit reporting agency must also provide the consumer with notice that a description of the procedure used to determine the accuracy, including the business name, address and telephone number of any furnisher of information, must be made available to the consumer upon request. This description of the re-investigation procedure must be provided within 15 days of the request.
The relevant laws are found in United States Code, Title 15, Chapter 41, entitled Consumer Credit Protection. The laws relating specifically to credit bureaus are found in Subchapter III of the above cited chapter, entitled Credit Reporting Agencies. The laws which detail requirements relating to information contained in credit reports is found in 15 USC § 1681c. The laws which require the credit reporting agencies to assure maximum possible accuracy are found in 15 USC § 1681e. To help clarify many common misconceptions, read this excellent article, Rampant Myths About Credit Reporting.
This most recent amendment to the FCRA enacted December 4, 2003, the Fair and Accurate Credit Transactions Act (FACTA), expands consumer access to credit reports and credit scores, further expands consumer rights to challenge data, includes provisions for dealing with identity theft, and requires creditors to advise a consumer when credit is offered on terms materially less favorable than those made available to most other customers.
In 2004, the Federal Reserve published a report entitled Credit Report Accuracy and Access to Credit, which examined, in detail, the credit reporting industry and the problems with data accuracy. Please read the report (in PDF or in HTML) for their detailed analysis.
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