Many Americans never overspend and take great pride in paying their bills on time. When they apply for credit, such as a mortgage, however, they may discover some shocking news: A credit report indicating seriously delinquent bills.
Most individuals never give a second thought to the mounds of financial paperwork and personal history that are accumulating in the files of consumer reporting agencies. Then a crisis occurs. Perhaps it is an unexpected denial on a credit card or auto loan, a refusal on an apartment, or an insurance premium increase. The Fair Credit Reporting Act of 1970 provides a measure of control over the harm third-party reports can do. Specifically, consumers must be told at their request what their files contain, and inaccurate information must be deleted or corrected.
Two kinds of agencies prepare reports on consumers, and the law covers both. Credit bureaus collect objective financial data for use by bankers, retailers, credit card issuers, and landlords. A spokesman for TRW Information Services (one of the largest sources of consumer credit information with files on 133 million people in fifty states, making it the industry leader in credit reporting) suggests that credit reports contain a great deal of sensitive information.
Data in a typical file is provided by creditors and gleaned from public records; it includes tax liens, bankruptcy information, outstanding loans, and details of credit card history, including the credit limit on each card, purchases, balances, and payment record. TRW's role is to compile this data.
Investigative reporting agencies, on the other hand, may pry more deeply. These agencies are generally hired by insurance companies considering taking on significant risk or by employers screening for important or responsible job positions. Their reports amount to a subjective assessment of lifestyle and character. An investigator goes to employers and even neighbors to find the answers to such questions as: Is the applicant involved in a hazardous job? . . . dangerous hobbies? . . . a drug problem?
Those who are worried about the reliability of all this evidence, can learn what's in a credit file or investigative report for a nominal fee, usually about $20. A bank or the yellow pages can tell which credit bureaus conduct business in the area.
The companies that commission an investigative report must inform the subject of the report when one has been done. Discovering which agency prepared the report is a simple matter of asking the company that made the request. If a report jeopardizes credit approval or a loan, the applicant has the right to know the "nature and substance" of the information at no cost.
The creditor desiring the information must disclose which firm prepared the report, including its address. Should there be incorrect information, the agency has to reinvestigate and confirm it, correct it, or delete it. Even if the reinvestigation shows the material to be accurate, brief explanations of extenuating circumstances can be added. Lists of everyone who has received files within the past six months, or within the past two years if it was sent for employment purposes, are available to the consumer. Should corrections be necessary, all the requesting parties can be sent an updated version by the reporting agency.
Should a credit bureau or investigative agency prove uncooperative, a letter to the Federal Trade Commission, Bureau of Consumer Protection, Washington, DC 20580, or your state Attorney General's office may expedite the process.
For the most vigilant consumers, TRW has introduced a service that gives credit users unlimited access to their files for a small fee every year. This is probably only necessary for those who are the most active credit seekers; they can investigate their file whenever they please for $20, or for free when turned down for credit.