The Fair Credit Reporting Act (FCRA) was enacted in 1970 to promote financial privacy and to set ground rules for fairness in credit reporting. Under the FCRA, access to a consumer’s credit report is specifically limited, though perhaps not quite as narrowly as the average consumer might expect.
In general, third-party access to a consumer’s financial information is initiated one of three ways: at the consumer’s specific request; by virtue of the consumer taking a particular action; or on order or judgment issued by a court of law.
It might come as a surprise that specific express, written permission to access a consumer’s credit report is required in very few circumstances, namely by current or prospective employers. In most other circumstances, permission to access one’s financial information is implied by virtue of a consumer’s finance-related action. Such actions commonly include:
- Applying for credit.
- Soliciting a new investment.
- Initiating a business transaction.
- Applying for a finance-related license issued by the government.
Once a creditor has permission—whether express or implied—to access a consumer’s credit history, the creditor’s access is permitted indefinitely as long as they are an active creditor for the purpose of monitoring the consumer’s credit accounts. Once the original application is submitted, no further permission is required, and the consumer cannot prevent the creditor from future access as long as the credit account is active.
In other cases, no consumer permission or consent is required at all. Though it is possible to opt out, prospective creditors have, by default, the right to access a consumer’s financial information for the purpose of offering pre-approved extensions of credit (such as offers commonly received in the mail). Likewise, consumer consent is not required when a court orders access to their credit report (e.g., during collection proceedings or for the purpose of determining child support payments).
Notably, the FCRA also gives consumers access to their own credit reports. Every consumer is entitled to receive an annual copy of their credit report at no cost. For a fee, a consumer can purchase a copy of their full credit report at any time through, among other sources, one of the big three credit reporting bureaus.
A number of online vendors offer constant credit report access and monitoring for free with the option to pay for additional services (e.g., Credit Karma). While these services can be useful for monitoring, for example, whether inaccurate or outdated information is present on one’s credit report or whether a disputed trade line has been successfully removed or corrected, consumers should be cautious about relying on the credit scores provided by these services. Free credit monitoring services generate revenue in substantial part by suggesting paid services to help consumers improve their credit scores, so it is in the monitoring service’s interest to use an algorithm that generates consumer scores lower than they actually are (i.e., lower than on TransUnion, Equifax, or Experian).
Consumers can learn more about their right to a free annual copy of their consumer credit report at www.annualcreditreport.com.