Credit Repair Through Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) governs how businesses may collect consumer information and establishes mechanisms for consumers to dispute credit errors. Credit repair allows individuals to improve their credit score by correcting inaccurate information in their credit reports. According to a study conducted by the U.S. Public Interest Research Group, 79 percent of U.S. credit reports contain serious errors or mistakes.

Report

To repair their credit, consumers must first identify negative and inaccurate information on their report. The Fair and Accurate Credit Transactions Act of 2003, an amendment to the FCRA, allows consumers to request one free credit report a year from each of the three major credit bureaus. Americans can access their free credit report from the official Annual Credit Report website. When consumers obtain a credit report, they can look at any negative data on the report, including inaccurate reporting or late payments.

Disclosure

If they do not check their credit report regularly, consumers may not find out about errors on their credit report until they are denied credit or a job. The FCRA requires anyone who denies an applicant for credit or employment to provide information on why the applicant was rejected and to give the applicant the name, phone number and address of whoever issued the credit report.

Dispute

Under the FCRA, individuals may dispute any inaccurate information. According to the FTC, consumers must send the credit bureau a letter in writing to investigate erroneous credit data. The credit reporting agency has 30 days to verify and review the disputed information. The agency must remove any inaccurate data from a consumer's credit report within 30 days.

Time Frame

If a consumer made bad financial decisions in the past, he may wait until items have been removed from his credit report to repair his credit history. The FCRA places a time limit on negative information in a credit report. Negative strikes against a consumer vanish from a credit report within seven years in the case of most debts, while a bankruptcy will stay on a credit report for up to 10 years.

Penalties

Under Section 616 of the Fair Credit Reporting Act, consumers may receive damages for inaccurate information on a credit report if the credit bureau refuses to comply with the terms of the act. These damages include compensation of $1,000 per error plus attorney fees. Section 618 of the FCRA allows individuals to sue a credit bureau in court within five years of a violation or two years from the discovery of the error.