About the Fair Credit Reporting Act of 1968

The Fair Credit Reporting Act was the federal government's first law regulating the credit industry. The act was intended to protect individuals by regulating the way business gathers and uses credit information about them. The act also makes it easier for individuals to learn about errors in their report and correct those errors.

Coverage

The Fair Credit Reporting Act covers consumer reporting agencies such as credit bureaus. It defines reporting agencies as any individual or company that gathers and evaluates credit information in order to provide it to a third party for a fee; if a store you do business with shares your credit history with an agency, the store would not be covered by the act. The act applies to reports concerning your creditworthiness, access to credit and credit history, and also reports about your general reputation, lifestyle and character.

Employment

It's become a common practice in business to check the credit reports on people who applies for a job, particularly if the job involves working with money or clients' accounts. The act requires that the employer obtain your permission if she hires someone to make a credit check; inform you if the information in the credit report costs you the job; show you the damaging information; and give you a contact number for the credit agency you can use to get inaccurate information corrected.

Information

The act requires that credit bureaus and reporting agencies have reasonable procedures in place to keep their information accurate. If there's a negative decision based on information in the report -- you're denied a job, an apartment or a credit card, for instance -- you're entitled to see the information on file. Agencies aren't required to provide a copy of the actual file, but they are required to tell you the information in it and the sources of the data. You have the right to get incorrect information removed.

Limitations

The act has loopholes. If an employer handles a background check in-house, rather than hiring an investigator, he has no obligation to get your permission or inform you of the results. Some states have passed laws that provide more protection: In California, for example, you can see your credit report after an in-house job screening, and even if the employer says the information didn't affect his decision.