Fair Credit Reporting Act

Fair Credit Reporting Act

A federal law intended to remedy abuses by credit reporting agencies. The law is enforced by the Federal Trade Commission,which maintains information on its Web site, www.ftc.gov. Generally, the law prohibits reporting erroneous or outdated credit information. The following adverse information cannot be reported:

• Civil suits, civil judgments, or arrest records older than 10 years or the statute of limita- tions, whichever is longer;

• Paid tax liens older than 7 years. (Note: Credit reporting bureaus and the Federal Trade Commission take the position that unpaid tax liens can be reported forever. This seems to be against the plain language of the statute.)

• Accounts placed for collection more than 7 years ago. When in doubt, the FTC assumes that an account will be placed for collection 180 days after it first becomes delinquent.

• Anything else, other than crimes, older than 7 years.

An important exception allows reporting of older information if the consumer is applying for a loan of $150,000 or more, life insurance with a face value of $150,000 or more, or a job with an annual salary of $75,000 or more.

Consumers may obtain one free credit report per year from each of the three major credit reporting agencies—Equifax, TransUnion, and Experian—by going to their centralized site of www.annualcreditreport.com.

(Beware of firms promising to “clean up your credit” for a fee. Many times, they employ illegal tactics that involve you committing fraud or perjury. The Federal Trade Commission has been very aggressive in suing such services.)