Credit History Report, FCRA, & FACTA

Understanding Credit History Check Law

It's important to understand credit history check laws and know your rights and obligations to prevent penalties and identity theft. Federal law allows businesses to check the credit history of potential employees and customers. It also lets any American citizen request his or her personal credit history report. However, it also places restrictions on credit report inquiries and requires businesses to destroy employment screening reports after using them.

The Fair Credit Reporting Act

Many companies use credit data in the employee screening process. The Fair Credit Reporting Act (FCRA) states that an employer must obtain permission from a job applicant before performing a credit history check. The FCRA requires the employer to use a separate form for this purpose, according to the Federal Trade Commission.

If a company uses this data to deny a person's employment application, federal law stipulates that the employer must let the applicant see the credit report. The FCRA also requires the employer to disclose the credit agency's contact information and supply a document that contains facts about the applicant's legal rights.

The Fair Credit Act does not allow anyone to request credit reports for any reason. Only commercial, nonprofit and government entities have the right to obtain this information. They must use it for legitimate purposes, such as pre employment checks or processing loan applications. The Fair Credit Act also requires them to protect the privacy of applicants.

Lenders, insurers, debt collectors and landlords don't need permission to check credit scores or reports. Nonetheless, a business owner must have a legitimate reason to perform a credit history check, so it's wise to obtain written consent. Federal law also requires businesses to supply credit reports to customers when they use the data to deny applications for housing, insurance, or loans.

The Fair and Accurate Consumer Transactions Act

The Fair and Accurate Consumer Transactions Act (FACTA) entitles each person to a free annual credit report. People can request these reports online, by mail, or by telephone, according to Experian. However, FACTA allows a credit agency to charge fees when a person requests credit score data or an extra credit history report.

To prevent identity theft, it is crucial for employers, banks and other organizations to handle credit data properly. Such entities must delete, shred or burn these documents when they are no longer needed. Federal law requires employers to destroy background checks and other employment screening reports as well.

Generally, the Fair and Accurate Consumer Transactions Act and the FCRA only permit a company to check someone's credit history if he or she has submitted an application. FACTA regulates pre employment checks more strictly than loan or insurance transactions. It is important to follow these rules, especially in the employee screening process. Violators may face legal action.