Who has the right to obtain my credit report?
The Fair Credit Reporting Act (FCRA) provides that anyone wanting access to your credit report must demonstrate a “permissible purpose.” This generally includes any person or business that needs to know if you pay your bills and are deserving of additional credit or a new loan. Those with a permissible purpose include credit card issuers, savings & loans, banks, and credit unions.
If you are trying to rent a house or apartment, your landlord has the right to verify your credit. As a practical matter, many leases and rental agreements include a clause that grants permission to the landlord to perform a credit check. Insurance carriers may access your report before they underwrite a new policy. If a legitimate debt has been assigned by one of your creditors to a collection agency, that agency can obtain your report.
The government can access your report if you have some form of business connection that has financial implications. This includes agencies that oversee child support enforcement and those that issue licenses and grant government-funded financial benefits. You have the right to obtain your own report under federal law. You may request one every year at no charge from each of the three major credit bureaus. It’s a good idea to review your report on a regular basis to ensure that it is correct.
Who needs permission and who doesn’t?
If the permissible purpose is present, then your permission is not required for any of these entities to get your report. They can contact any of the credit bureaus and purchase your report by demonstrating their need for the information. This usually happens when you apply for a loan, credit card, or insurance policy. To avoid problems, many lenders include a credit check clause in the application that notifies you in advance that they will do a check before approving your loan. You should be aware, however, that they are not required to do this if they have a legitimate need.
There are instances where your advance permission is required such as an inquiry by a prospective employer. Since employers aren’t in the business of lending you money, their purpose is more related to your financial status and stability. Therefore, they will see a modified version that only contains information directly related to your financial affairs. Many employment application forms contain a provision that enables their inquiry, so it’s your decision on whether or not you want to grant them access. As a general rule, you should grant access to your report when it will directly benefit you, and deny access when it will not.
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How do I know who obtained my credit report?
Each time your report is released, the inquiries section will display a flag with the name of the requester. The report may also include the address of the requester. Your goal should be to minimize the number of inquiries since this can negatively impact your credit score. The implication is that frequent inquiries may signal a current or pending problem with your ability to get credit. A “hard pull” occurs when you submit a loan or credit card application and the lender requests your report. This stays in your file and can cost you about five points on your score for the following six months. To avoid this problem, you should only apply for credit you really need and try to use one source rather than several to get the amount desired.
A “soft pull” occurs when someone simply checks to see if you might pre-qualify for a new loan or credit card. It doesn’t affect your score because it’s an informal check that may never result in new credit being extended. Soft pulls are used as a screening device by some banks before they will open a new account, and employers as part of their background check. Also, requesting your own report will not affect your score.
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What happens if someone obtains my credit report illegally?
The Federal Trade Commission (FTC) has enforcement authority over the Fair Credit Reporting Act(FCRA). If anyone obtains your report under false pretenses, they may be prosecuted under federal criminal statutes that provide for both fines and possible imprisonment for up to one year. Your best defense against this type of activity is to request a free copy of your report every four months. Anyone requesting your report must have either a permissible purpose or your advance consent. If you see any entries on your report that don’t seem to fit in either category, you should report this to the credit bureaus and to the FTC.
If you suspect that you are a victim of identity theft, you also have the option of instituting fraud alerts and placing a freeze on your file. Under a security freeze, the credit bureau is prohibited from releasing your report without your written authorization. The only exceptions are requests from those holding your existing accounts. You may also request that the bureaus not share your information with any marketing entities that are in the business of selling credit.
Relevant Links
Federal Deposit Insurance Corporation