Credit history, credit bureaus and credit reporting are multibillion-dollar industries. Whenever someone applies for credit, he agrees that the information on the application, the decision concerning the credit and the history of the credit line are all subject to recording with various credit agencies. Additionally, these agencies are allowed to use the information to give other businesses information about the borrower. Whenever aberrant activity appears on a person's credit history, it is a marker that there may be misappropriation of credit. When this happens, borrowers can receive alerts concerning their credit.
Fair Credit Reporting Act
In 1970, Congress passed the Fair Credit Reporting Act (FCRA). The FCRA dictates what a credit agency (or bureau) can do and cannot do and what it must provide for both borrowers and lenders. The FCRA also mandates how credit reporting agencies must provide security for clients (borrowers and lenders) and for all the information the agencies accumulate.
Any illegal access to the information or attempts to misappropriate a person's credit is prohibited by the FCRA and subsequent amendments to the legislation.
Credit Reporting Bureaus
There are three major credit bureaus reporting credit history to paying clients: Equifax, TransUnion and Experian. These agencies have vast data files on both borrowers and lenders. It's important, however, to remember these reporting agencies are money-making businesses. They exist to buy and sell information. Borrowers agree to provide information in return for having their credit applications processed at no charge. Businesses agree to provide transaction records in return for accessing the credit histories of borrowers. In the middle, the agencies charge money for supplying requested information. Each time someone "runs a credit check," the bureaus charge a set fee.
Credit Monitoring
Credit monitoring is the practice of watching people's credit and making notifications when something unique or different occurs. Someone with a home loan and one credit card making $50,000 annually who tries to use good credit to buy a $200,000 automobile would send up a signal. By the same token, a credit history showing several small new accounts on several credit cards could indicate illegal credit access.
Identity Theft
If the credit monitor notifies a borrower of the activity and the borrower denies any involvement, it can be a quick indication of identity theft. Someone else is using a person's personal information to access credit. Identity theft is a crime, and the FCRA dictates how the prosecution of the crime and restitution to the victims are administered.
Alerts
Credit monitoring alerts are not always indications of credit-related crime. In some instances, borrowers just decide to use their credit for several purchases or lines of credit. When the alert comes in (by email or phone call), the alerted party has the choice of acknowledging the credit activity or denying the credit problems and starting legal action.
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