What Is the Purpose of the Fair Credit Reporting Act?

The purpose of the Fair Credit Reporting Act is to make sure the information collected about your borrowing and payment history is accurate, private, and used only for legitimate reasons. Enacted in 1970 and codified at 15 U.S.C. § 1681, the FCRA sets the ground rules that Equifax, Experian, TransUnion, and the businesses that report to them must follow when handling your financial data.¹ It also gives you enforceable rights: to see your file, correct errors, limit who can pull your report, and sue when someone violates the law.

Accuracy Requirements for Agencies and Furnishers

Credit reporting agencies must follow reasonable procedures to ensure the maximum possible accuracy of the information in your file.² That means internal quality controls that keep files from getting mixed up between consumers with similar names and that keep outdated records from sneaking back in. An agency that falls short can face civil liability.

The law also reaches the companies that feed data to the agencies, known as furnishers. Banks, credit card issuers, and other creditors must have policies to avoid reporting information they know is wrong, and when a furnisher discovers that data it previously sent was incomplete or inaccurate, it must promptly correct that information with every agency it originally reported to.³ Once an error is caught, it shouldn’t keep spreading across your other reports.

Who Is Allowed to See Your Credit Report

Your credit report is not open to anyone who asks. The FCRA limits access to parties with what the law calls a permissible purpose:

A lender reviewing your application or an existing account.
An insurer evaluating whether to issue or renew a policy.
An employer or prospective employer conducting a background check, but only after giving you a written disclosure in a standalone document and receiving your written consent.⁴
A landlord evaluating a rental application.
A government agency determining eligibility for a license or benefit where financial status is relevant by law.
A court with proper jurisdiction, or a federal grand jury subpoena.
You, when you request your own report in writing.

The employment rule is stricter than most people realize. Before pulling your report, an employer has to give you a clear written notice on its own page, not buried inside a job application, and you must sign off in writing.⁵ Without both pieces, the employer can’t legally get the report.

Agencies themselves act as a gatekeeper. Before releasing a report, they must take reasonable steps to verify the identity of the requester and confirm the stated purpose.²

Your Right to See Your Own File

You are entitled to see everything in your credit file. When you request a disclosure, the agency must give you all information it has on you at that time, the sources of the data, and a list of everyone who recently requested your report. The agency also has to include a summary of your rights under the FCRA with every file disclosure.⁶

By statute, each nationwide agency must give you one free report every 12 months.⁷ Beyond that, Equifax, Experian, and TransUnion have made free weekly reports permanently available through AnnualCreditReport.com, a program that began as a pandemic-era measure and continues on an ongoing basis.⁸

You also get a free report when an adverse action is taken against you, when you’re unemployed and planning to apply for work within 60 days, when you’re on public assistance, or when you believe your file contains errors caused by fraud.⁷

How Long Negative Information Can Stay

Old bad marks don’t follow you forever. Most adverse items, including late payments, collection accounts, and paid tax liens, drop off once they are more than seven years old.⁹ Bankruptcy stays longer: up to 10 years from the filing date, regardless of chapter.¹⁰

A few exceptions exist. Criminal convictions can be reported indefinitely, and the seven- and ten-year limits do not apply when you’re being evaluated for a credit transaction or life insurance policy with a face amount of $150,000 or more.⁹

Disputing Errors on Your Report

If you find something wrong, you have the right to dispute it with the reporting agency. Once you notify the agency, usually in writing or through an online portal, it must investigate within 30 days. That window can be extended by 15 days, to a total of 45, if you send in additional information during the investigation.¹¹

During the investigation, the agency contacts the furnisher that supplied the disputed data. The furnisher checks its records and reports back. If the item can’t be verified or turns out to be inaccurate, the agency must delete it promptly, and the furnisher has to notify any other nationwide agencies it previously sent the bad information to.³

Freezes, Fraud Alerts, and Identity Theft

If you’re worried about identity theft, the FCRA gives you two tools.

A security freeze blocks the agency from releasing your report to new creditors, which keeps thieves from opening accounts in your name. Placing and removing a freeze is free. When you request a freeze by phone or online, the agency must put it in place within one business day, and lift it within one hour when you ask through those same channels. Mail requests take up to three business days in either direction.¹²

Fraud alerts work differently. Instead of blocking access, they flag your file so anyone pulling your report has to take extra steps to verify your identity before extending credit. An initial fraud alert lasts at least one year and can be placed by contacting an agency and stating in good faith that you suspect you are or may become a victim of fraud. An extended fraud alert lasts seven years and requires submitting an identity theft report, such as a police report, to the agency.¹²

If you’ve actually been a victim, you can ask the agency to block fraudulent accounts from your file. The agency must block the identified items within four business days of receiving your identity theft report, proof of identity, and a statement identifying the fraudulent information.

Adverse Action Notices

When a lender, insurer, employer, or landlord uses your credit report to make a decision that goes against you, denying a loan, raising your rate, or turning down a rental, it must send you an adverse action notice. The notice has to include the name, address, and phone number of the agency that supplied the report; a clear statement that the agency did not make the decision and cannot explain why it was made; the credit score used, its range, the key factors that hurt it (up to four, or five if one of them is the number of recent inquiries), the date the score was created, and who provided it; and a reminder that you can get a free copy of your report from that agency within 60 days and dispute anything you believe is inaccurate.¹³

Without this notice, you might never learn that a credit report played a role in a denial, or that the report contained an error worth disputing.

What You Can Recover if the Law Is Broken

The FCRA lets you sue in federal or state court when an agency, furnisher, or report user violates it. What you can recover depends on whether the violation was willful or negligent.

For willful violations, meaning conduct that is knowing or reckless, you can recover either your actual damages or statutory damages between $100 and $1,000, whichever is greater. A court can also award punitive damages in an amount it considers appropriate, plus attorney’s fees and court costs.¹⁴ If someone obtained your report under false pretenses or without a permissible purpose, the minimum recovery is $1,000 or your actual damages, whichever is higher.

For negligent violations, you can recover your actual damages along with attorney’s fees and court costs.¹⁴ Punitive damages and statutory minimums are not available, so you’d need to show a specific financial harm, such as a lost loan opportunity or a higher interest rate caused by inaccurate reporting.

You must file within two years of discovering the violation, and no more than five years after the violation actually occurred, whichever comes first.¹⁵ Because report errors can go unnoticed for a long time, pulling your file regularly protects both your credit and your ability to act on the law’s remedies.

1
Office of the Law Revision Counsel. 15 USC 1681 – Congressional Findings and Statement of Purpose
2
Office of the Law Revision Counsel. 15 USC 1681e – Compliance Procedures
3
Office of the Law Revision Counsel. 15 USC 1681s-2 – Responsibilities of Furnishers of Information to Consumer Reporting Agencies
4
Office of the Law Revision Counsel. 15 USC 1681b – Permissible Purposes of Consumer Reports
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U.S. Equal Employment Opportunity Commission. Background Checks: What Employers Need to Know
6
Office of the Law Revision Counsel. 15 USC 1681g – Disclosures to Consumers
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Office of the Law Revision Counsel. 15 USC 1681j – Charges for Certain Disclosures
8
FTC Consumer Advice. You Now Have Permanent Access to Free Weekly Credit Reports
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Office of the Law Revision Counsel. 15 USC 1681c – Requirements Relating to Information Contained in Consumer Reports
10
Consumer Financial Protection Bureau. How Long Does a Bankruptcy Appear on Credit Reports?
11
Office of the Law Revision Counsel. 15 USC 1681i – Procedure in Case of Disputed Accuracy
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Office of the Law Revision Counsel. 15 USC 1681c-1 – Identity Theft Prevention; Fraud Alerts and Active Duty Alerts
13
Office of the Law Revision Counsel. 15 USC 1681m – Requirements on Users of Consumer Reports
14
Office of the Law Revision Counsel. 15 USC 1681n – Civil Liability for Willful Noncompliance
15
Office of the Law Revision Counsel. 15 USC 1681p – Jurisdiction of Courts; Limitation of Actions