Prior to the passing of the Fair Credit Reporting Act, banks and other lenders were largely unregulated and they would loan money and deny loans at their own discretion. The FCRA protects consumers from being discriminated against due to race, ethnicity, family, and other subjective means of determining an individual’s ability to repay a loan.

What does the Fair Credit Reporting Act do for you?

The Fair Credit Reporting Act serves three main functions in protecting consumers like you:

1. Regulate consumer reporting agencies – According to the FCRA, consumer reporting agencies are required to provide consumers with a free copy of their credit report once a year – Learn how to obtain your free copy here. The consumer reporting agencies also must provide a way in which consumers can dispute incorrect items from their credit report. Finally, the FCRA outlines how long a negative item can remain on an individual’s credit report. Typically, items remain on your credit report for seven years, but can be as long as 10 years in cases of bankruptcy.

2. Regulate credit information providers – The FCRA regulates the companies that can provide information about a consumer’s credit history to the credit reporting agencies. These information furnishers typically include banks, credit card companies, courts, and other kinds of lenders. These companies are responsible under the FCRA to provide accurate information to the credit reporting agencies, notify customers when negative items are about to be put on their credit report, and investigate disputes which come through the credit reporting agencies.

3. Regulate the users of consumer credit information – Lastly, the FCRA is designed to protect who is permitted to access an individual’s credit history. The FCRA limits credit inquiries primarily to lenders, insurance companies, and employers. In addition, these users must notify the consumer when a negative course of action is taken as a result of items included on a credit report.

How can you make the Fair Credit Reporting Act work for you?

The FCRA is can be an extremely useful tool in protecting consumers. It enables consumers to know more about why they are denied funding, as well as what they can do to secure loans in the future. Disputing negative items on your credit report can help you improve your credit score.

Luckily, you don’t have to learn all the rules and guidelines of the FCRA in order to put it to use in your life. Companies like Lexington Law specialize in helping consumers use the FCRA and others laws to your full advantage. You can sign up with Lexington Law and have them do all the hard work for you as you get your financial welfare on the right path by repairing your credit.

Most unlawful credit repair companies have been taken down by the FTC; however there are still some in operation. If you are would like to repair your credit, it’s important that you don’t get lured in by illegal tactics and fraudulent companies. If you follow illegal advice and commit fraud, you may be subject to prosecution. Below is a list of illegal credit repair techniques to look out for:

Illegal Credit Repair Tactics

• Changing your social security number or starting a “new” credit file. Some companies will offer to teach you how to start a new credit file by applying for an Employer Identification Number to use instead of your Social Security number. Avoid and report such companies.

• Companies that ask you to pay for credit repair services before they provide any services.

• Companies that don’t tell you your legal rights and what you can do by yourself for free.

• Remember, it is also illegal to try to obtain credit by lying or making false statements on an application.

Now that you know what to avoid, let’s look at some of the things you can do to repair your credit.

Legal Credit Repair Tactics

• Dispute erroneous information on your credit report. Not only is it legal, it’s your federal right. The Fair Credit Reporting Act gives you the right to dispute items on your credit reports directly with the credit bureaus. The burden of proof is on the credit bureaus. If they can’t verify that information is correct, then it must be deleted.

• Debt validation is a tactic that’s used when dealing with collection accounts. The FDCPA gives you the right to demand that collection agencies validate any debts that they are trying to collect on.

• Negotiating directly with creditors is a tactic that is sometimes used to ask the creditors politely to remove the negative items from your credit report.

If you would like to have professionals repair your credit, check out the top legal credit repair services. If you prefer to do-it-yourself, the credit repair forums are a great place to start!

First of all, it’s all about profit. Creditors want to keep you in what is called the “subprime gap”. It’s the most profitable place to keep you. They want your credit rating to be high enough for you to be able to get a loan and not default on it, but low enough for you to pay their highest interest rates.

Perhaps the following passage from the bible explains it best:

“The rich rule over the poor, and the borrower is servant to the lender.” – Proverbs 22:7

The Credit Scoring System

It is so incredibly important in this day and age to understand “the credit game” and exactly what’s going on. Many of the people who fail to understand this will simply be left behind. The credit scoring system is designed for one purpose and one purpose only and that is to maximize creditor profits. Debt collectors and the credit reporting agencies are also making plenty of money from the game as well, they just happen to be on the sidelines watching the “system” they’ve designed.

The credit reporting system was not designed with the consumer in mind and it is corrupt because of who profits most from it. For years, consumer advocate groups have lobbied for reform. Finally, in 2004 Congress approved changes to the Fair Credit Reporting Act that placed new procedural requirements on the credit bureaus.

Some decent changes have been made in the law, but these changes have accomplished very little in terms of accuracy of information. Despite plenty of lawsuits and a record number of complaints to the Federal Trade Commission, regulators are just not enforcing the new laws.

The whole credit scoring system is still unfair because consumers are guilty until proven innocent. Credit bureaus are still re-aging accounts. They still refuse to re-investigate accounts that have been “previously verified”. They still reinsert deleted accounts without notifying the consumer as required by law. They still refuse to investigate inquiries. They still allow debt collectors to place hard inquiries on credit reports when the inquiry should be a harmless account review. (This alone can lower your score up to 50 points.)

Did you know that the FTC refers consumer complaints to credit reporting agencies? That’s right. When you complain to the FTC about Equifax, Trans Union of Experian, they forward your complaint right back to them. The agencies will review the complaints and report the results to the FTC. Some believe it improves the odds of getting an inaccurate account deleted considerably. I believe the disputes should have been taken seriously without having to complain to the FTC.

Winning the “Credit Game”

It’s an educational process. But, it’s important to learn as much as you can about how the system works. For those of you with bad credit, it starts with repairing and rebuilding your credit. Do whatever it takes to get out and stay out of the subprime gap! You don’t have to be a servant to your creditors the rest of your life.

The credit reporting agencies – TransUnion, Equifax and Experian are the three national credit reporting agencies that keep records on consumers. The reporting agencies work with lenders, creditors, insurers and employers to update and distribute your information to the appropriate institutions. Here’s an example of how the system works:

1. When you apply for a new credit card the creditor requests a copy of your financial history from the reporting agencies. This causes a “hard inquiry” to be recorded on your credit report.

2. The creditor uses your credit reports and scores along with income and debt information to determine what rates to offer.

3. You start to use the new credit card and the creditor reports your activities to the credit reporting agencies about every 30 days.

4. The credit reporting agencies update your credit report as they receive new information from creditors or lenders.

5. Your credit profile changes based on your financial activity. The next time you apply for a credit card or loan, the process repeats.

Your Credit Report

Your credit report is divided into six main sections: consumer information (address, birthday and employment), consumer statement, account histories, public records, inquiries and creditor contacts. When you open a new account, miss a payment or move, these sections are updated with new information. Old negative records will stay on your credit report for 7-10 years. Positive records can remain on your credit report longer. Not all creditors report to all three agencies and the agencies obtain their data independently so your reports from TransUnion, Equifax and Experian could be substantially different from each other. That’s why it’s important to check your three credit reports every 6-12 months to ensure that the information is accurate and up-to-date.

Correcting Inaccuracies

Under the Fair Credit Reporting Act, consumers are protected from having inaccurate information on their credit reports. If you find an inaccurate record on your report, try contacting the creditor or lender associated with the mark first. These companies can usually correct the mistake and send an update to the credit reporting agencies. If you can’t make progress this way, you can also dispute the inaccuracy directly with the credit reporting agencies.

Working the System

Keeping your credit reports healthy will improve your credit scores and help get you the best rates on major purchases. We recommend that you check your credit reports every 6-12 months or at least 3 months before a major purchase in order to guard against damaging inaccuracies and identity theft. Routine check-ups along with paying your bills on time, keeping your credit card balances below 35% of their limits and correcting any negative inaccuracies will help you maintain a healthy credit profile.

What the credit bureaus are is something much different from what most people believe. Put simply, the credit bureaus are massive, for profit corporations who make money by selling your information. They sell it to creditors, employers, insurance companies, marketers, and even back to you.

The big three credit bureaus, Equifax, Experian, and TransUnion, all trace their ancestry to small, local investigative companies. These early credit bureaus would collect every bit of seemingly relevant information they could about a person including employment history, marital status, age, race, religion, testimonials, and any other information they could get their hands on. They would then provide this information to creditors who used it to determine whether or not a person was worthy of a loan and how much interest they would be required to pay.

Over time, the credit bureaus grew and merged until the credit reporting system moved from one with many local credit bureaus to the current system of three major nationwide credit bureaus. As this happened, the large credit bureaus became so powerful that it became necessary for them to be regulated. This resulted in the Fair Credit Reporting Act (FCRA) being passed to protect you from the growing power of the credit bureaus.

Credit scores had become increasingly important and it was the credit bureaus that had full control over the information used to create these scores. The problem was that the credit bureaus, as is the case today, are primarily motivated to collect your information and then sell it off. This meant that even though the credit bureaus were the definitive source for your credit information, they had no motivation to ensure its completeness or accuracy. They merely took the information they were provided, added it to your credit reports, and sold it off.

The FCRA was passed to add accountability to the credit reporting process. The credit bureaus were no longer able to collect whatever they wanted and to not tell you what was on your credit reports. As a result of the FCRA, you have a right to a free yearly copy of your credit reports (see AnnualCreditReport.com) and you have the right to dispute the accuracy of the items in your credit reports. While this does not mean the credit bureaus now make sure your reports are accurate, it does give you recourse when the credit bureaus unfairly report your credit history.

Unfortunately, however, the FCRA did not eradicate all the problems of the credit reporting system. The credit bureaus are still enormous corporations with enormous power. They are also still primarily motivated by the money they make by selling your credit information. Providing you with credit reports and investigating credit disputes is something they are forced to do and not something they were willing to do on their own. As such, the credit bureaus do what they can to avoid these practices.

Specifically as it relates to credit repair, the credit bureaus have developed a full arsenal of tactics to keep from investigate disputes. These tactics range from general propaganda, to strong-arm tactics, to methods of questionable legality.

How many times have you heard that credit repair is impossible, the only way to improve your credit is to wait seven years, and any company who offers to repair you credit is a scam? It is surprising so many people believe some or all of these statements when not a single one is true. This misinformation is the best friend of the credit bureaus as it dissuades so many people from even attempting to dispute their credit. No wonder the credit bureaus are so quick to promote this flawed perception.

Knowing the history and the motivations behind the credit bureaus is your tool to understanding the nature of the credit reporting system. When you know the true persona of the credit bureaus, you can then see why you are granted access to your credit reports, why you have the right to repair your credit, and why it can be beneficial to have a credit repair expert working on your side.