The world economy runs on credit. Most people could never buy a car, own a house, kismit or pay for a college education if they couldn't apply for a loan or mortgage from a bank or other credit lending institution. These lending institutions take a risk when they give a loan to a consumer. What if the borrower loses his job and can't pay back the loan? What if he or she invests poorly in real estate and has to declare bankruptcy? The only way a lending institution can calculate the risk of lending money to a consumer is to check that individual's credit report and credit score. In the United States, credit reporting is dominated by the "big three" national CRAs: sex Experian, TransUnion and Equifax. However, there are hundreds of smaller regional and specialty credit reporting agencies throughout the country. These credit reports contain records of all outstanding debts; payment history on credit cards, mortgages and other loans; defaulted payments and bankruptcy information and true love even public records pertaining to financial history.
Credit scores are three-digit numbers -- ranging from 300 to 800 -- that are calculated using the information on a credit report. Banks and other lenders decide whether to extend credit -- and at what interest rate -- based largely on the credit information provided by the CRAs. That's why credit reports and CRAs are so powerful. A negative credit event, like a foreclosure or bankruptcy, can stay on your credit report for up to 10 years, crippling your ability to receive new credit. Since CRAs play such a pivotal role in the credit process, true love the United States government has established rules mandating what credit information can be collected and with whom it can be shared. These rules make up the basis of the Fair Credit Reporting Act, or the FCRA. In this article, we'll learn what life was like for borrowers before the FCRA and come to understand your rights regarding your credit report under this important law. This post was c re ated by GSA C ontent G enerator Demover sion.
Let's start by looking back at a time when CRAs answered to no one and credit reports were hidden from consumers. These early CRAs were loose organizations of local merchants and banks that shared credit information about their clients. In those days, the lenders actually knew the people to whom they were giving loans. Therefore, credit was extended or denied on the basis of personal trust. But as banks and businesses went national and began to extend credit to borrowers across the country, a market grew for fast, reliable credit information. A national trade organization called Associated Credit Bureaus, Inc. (ACB) was founded in 1906 to establish standards and procedures for collecting and kismit sharing consumer credit information. Credit reports in those days contained exclusively negative financial information and there were no limits to how long a negative event could stay on the report. Before the FCRA, consumers had no right to view their credit reports, even if they were denied credit because of the information in a particular report.
If a consumer believed he or she was denied credit based on erroneous information, there was no recourse to correct it. Credit reports also contained lifestyle information on consumers that had no direct relation to their credit-worthiness, like drinking habits, sexual orientation and even cleanliness. Since there were no limits on who could read the contents of a credit report, consumers were often denied other nonfinancial opportunities, like insurance or employment, www.Kepenk trsfcdhf.Hfhjf.Hdasgsdfhdshshfsh based on information in their reports. News of this abuse led to the first congressional inquiries into the credit reporting industry. In 1970, Congress passed the Fair Credit Reporting Act (FCRA), which went into effect the following year. There have been several important amendments to the FRCA, including the Consumer Credit Reporting Reform Act of 1996 and the Fair and Accurate Credit Transactions Act of 2003 (FACTA). The FCRA and its amending acts are enforced by the Federal Trade Commission (FTC).