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Background on Credit Records and Credit Bureaus

If you have credit, a national credit reporting agency collects information about how much you owe, whether you pay bills on time, and more.

Credit bureaus are for-profit companies that gather and sell information about a person's credit history. The types of entities that buy this information include credit card companies, insurance companies, telemarketers, collection agencies and direct mail marketers. A credit bureau may sell information such as your name, address, and telephone number.

For example, when you authorize a car dealership to check your credit for an auto loan, the credit bureau may then sell your information to any other company that provides auto loans. This information is sold 24 hours to 30 days from the time your credit report was pulled. This is not something you need to authorize and you cannot opt out.

The three most well-known credit bureaus are:

  • Equifax
  • Trans Union
  • Experian

In addition to these three, other smaller credit bureaus may also be collecting, selling and storing information about you.

What Is the Fair Credit Reporting Act?

The Fair Credit Reporting Act (FCRA) regulates credit bureau activities. The Act requires credit agencies to share their data only with those who have a legitimate business reason for the information (which includes employers).

Since it was written in the 1970’s, the Act predates computerization. Additionally, the Act’s protection is broadly interpreted. A common strategy that the bureaus use is to create a list based on your age, state of residence, gender, annual income and credit score. They then categorize you, place you in a generalized demographic and sell your name to marketing companies that target that demographic. So, consumers remain inadequately protected.

Can Employers Check Your Credit

Many employers do routine credit checks on employees and job applicants. There is little you can do to prevent such actions. Employers may use your credit history in deciding whether to hire you.

Under the FCRA, employers have broad access to your credit report, which can be used in an evaluation of employment, promotion or retention, especially in a position where security is a concern, such as at a government agency. Credit bureaus track your bill-paying habits and all the companies you have agreed to let access your credit report. (e.g., when applying for credit, insurance, a home, or a new job). Employers may use this information to find out whether an employee is seeking another job with other companies.

What Are My Rights as an Employee?

The FCRA provides some rights to the employee to know whether a current or potential employer is accessing their credit information and how that employer is using that information. An employer must get written permission from the employee before looking at their credit report. This grant of permission cannot be hidden in a job application or other standard form. The employee must sign a separate document to signal approval.

If the employee is rejected from a job based on their credit report, the employer must provide a copy of the report, as well as written instruction on how the employee can challenge the report's accuracy. This is also the policy with other loan applications where a person is denied credit based on their report.

What Can I Do if I Am Rejected Because of My Credit Report?

There are certain things you can do if you are rejected based on your credit report:

  • If an employer uses your credit information against you, they must admit doing so and give you the name, address, and telephone number of the credit agency that provided the report.
  • You are entitled to a free copy of the agency's report.
  • You have the right to correct any errors in reports compiled about you.
  • You should check and correct your file every few years (especially if job hunting or applying for credit).
  • You should contact your state consumer protection agency or attorney general if you suspect misuse of your credit report.

Do I Need a Credit Lawyer Experienced with Credit Reports?

There are many loopholes in the FCRA and, unfortunately, it is the one law that affords you the most protection. An attorney will be able to help you fully take advantage of the rights you do have.

Photo of page author Nicole Shoener

, LegalMatch Legal Writer

Last Modified: 04-20-2017 01:13 AM PDT

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