A new law, the "Consumer Credit Reporting Reform Act of 1996,"
will make it easier for individuals to correct mistakes on their credit
reports -- and keep them off. The main purpose of the law is to make
credit reports more accurate. Following are some of the highlights.Fixing Mistakes: If you tell a credit bureau that there's a mistake in your credit report, the bureau must investigate and resolve the matter promptly -- in most cases within 30 days. You must get the written results of the investigation along with a corrected copy of your report (if there was a correction) and information about your rights under the credit laws within five days of when the bureau finishes its investigation. If you provide any documentation to back up your side of the story, the bureau will have to consider it, and also must share it with the company that originally reported the information to the bureau.
If the creditor or bureau does make a correction to your information, you won't have to worry anymore about correcting the mistake with all the bureaus that have the wrong information. Under the new law, that will be taken care of automatically.
Keeping Mistakes Out: If the credit bureau does take wrong information from your file, it's supposed to keep if from going back in. In fact, the bureau can't put it back on your credit report unless the furnisher (credit card company or lender) supplying the information to the credit bureau certifies that it is correct. Also the credit bureau must send you a notice with the name, address and phone number of the company furnishing the information -- and a description of your right to add an statement to your file explaining your side of the story.
For the first time, the law also puts requirements on lenders and other companies that report information. Anyone who supplies information to credit bureaus cannot provide information they "know or consciously avoid knowing" is inaccurate. These furnishers will also be required to promptly investigate and correct, if necessary, any mistakes brought to their attention by a credit bureau or consumer. Corrections must be sent to all major credit bureaus to which they reported the information.
If a consumer notifies a creditor or other furnisher that information is not correct, the furnisher cannot report that information to a credit bureau without noting that it is disputed by the consumer.
Employer's must ask first: Many people don't realize that under the current FCRA employers can review prospective or current employees' credit files -- without their permission. Under the new law, an employer must first get the employee's written permission. Then, if the employer decides to take adverse action (not hire, demote or fire) against the consumer because of information in the report, must provide a copy of the report -- with a description of the consumer's credit rights.
No break on the fee: One of the provisions consumer groups lobbied hard for was a requirement that bureaus provide consumers with a free annual copy their credit report upon request. Unfortunately, that didn't make it into law, so you'll pay $8 for a report, adjusted annually for inflation. (Except in states where free reports are required by state law.)
You can get a free report, though, if: you have been turned down for credit or insurance in the past 60 days (instead of the previous 30) based on information in your credit report; you're unemployed and seeking work; you're on public assistance; or you've been a victim of credit fraud.
Closed accounts closed: When you tell a creditor that you are closing an account, they are required to notify the bureaus, which in turn must report the account as closed at your request.
Inquiries: It used to be nearly impossible to decipher the names of some companies that had seen your report because they were written in confusing codes. Consumers who request their credit reports will have to be given the name or full trade name of anyone who has requested their credit report in the past year (two years for inquiries by employers.) And even better, you can ask the credit bureau for the addresses and telephone numbers of any of these companies.
Obsolete information: I recently received a call from an acquaintance who has been trying to clean up his credit for about five years now. It turns out that a department store didn't write off one of his delinquent accounts as a charge-off until several years after he fell behind. Since the seven-year reporting period for charge-offs doesn't begin until the account is charged off, that means it will stay on his report years longer than it really should.
Perhaps one of the most helpful provisions in the new law is that it makes it explicitly clear that collection, profit-and-loss, or other similarly delinquent accounts can be reported seven years -- and that the seven-year reporting period begins 180 days after the payment should have been made. This applies only to information added to the report on or after January 1, 1998 though.
Prescreening and preapproved offers: One thing the industry wanted most out of the revisions in the law was an expanded ability to use credit files for prescreening -- a.k.a. preapproved offers. The new law does say that credit or insurance companies which use prescreening to qualify customers have to make a "firm" offer of credit to anyone who meets the initial prescreening criteria. But then it also says that if the consumer responds, the lender can review the credit report and application to make sure nothing in the initial prescreening has changed -- and more outrageously from my standpoint -- that additional pre-determined criteria in the application are met. Of course, those additional criteria don't have to be spelled out anywhere. In fact, you will likely never know what they are.
In exchange for these loose pre-screening requirements, credit reporting agencies now must give consumers the option of blocking their files from prescreening (at all three major bureaus) by calling a single toll-free number. The phone call will get you a two-year block, but you can also request an indefinite block, which will require you to put it in writing.
Scores still secret: Another blow for consumers is the fact that credit bureaus are specifically let off the hook when it comes to revealing risk or credit scores. These secret scores are compiled by credit bureaus who then sell them to lenders, who then decide whether or not to approve applications.
Most of the provisions in the Consumer Credit Reporting Reform Act of 1996 go into effect October 1, 1997.
