The Fair Credit Reporting Act (FCRA) 

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    Here's Everything The Credit Bureaus and Collection Agencies Don't Want You To Know About The Fair Credit Reporting Act

    The Fair Credit Reporting Act (FCRA) was passed back in the 1970s and updated in 2001… and it's probably the best thing the government has done for the American people since declaring independence from Britain in 1776.


    Because this act was set up to protect your credit rights and to arm you with the tools you need to stand up to the Credit Bureaus and Collection Agencies and make them prove every bit of derogatory information they report on you. For years Fair Isaac (the company who invented credit scoring and for whom the FICO score is named) and the three major credit bureaus pulled every trick they could to keep the American consumer from having any idea what was on their credit reports. In 2001 outraged consumers finally got satisfaction when Congress UPDATED the FCRA. (And let me tell you, when this amendment went through, I did a little dance of joy right there in my office. Why? Because my job just got easier and there were suddenly a whole lot more people I was going to be able to help.)

    Under this wide-ranging new legislation the Credit Reporting Agencies MUST: Provide you with information about what's in their files and take steps to verify the accuracy of any information disputed by a consumer.

    Read that part again. It's important. It basically says that Credit Reporting Agencies can only keep negative items on your report if they can prove their validity. That means that—if you take the proper steps—the credit agencies must obliterate inaccurate, obsolete and non-verifiable items from your credit report like they were never there.

    Let's go over what those three little words mean for a second:

    Inaccurate – These are items that should never have been on your report in the first place. According to a study in 2004, 79% of Americans have completely bogus negative stuff on their credit report. Items that belong to someone with the same name, that were reported by an overzealous creditor or that just crept in there due to the mind-crushing bureaucracy of our credit reporting system.

    Obsolete – These are items that are 7-years past their "Date of Last Activity"— and should have faded off your credit report by now. Think that the collection firms and credit agencies keep "perfect records" and knock off old items the day they go "bad?" Think again. In fact, some collection agencies make a habit of screwing with the Date of Last Activity and keeping old mistakes from ever fading quietly into the background.

    Non-Verifiable – This is the big one. This is the little hyphenated word that's going to help you claw your way to FICO nirvana. Thanks to the FCRA, the burden of proof for derogatory credit items on your credit report lies with the Reporting Agencies. Basically, this means you're innocent unless proven guilty. If you contest an item with a credit agency—and I've contested thousands in my 17-year career—they have to go through a whole bunch of rigmarole to prove that it should be there. If they can't prove it, or if they're too lazy to prove it? Gone—often boosting your credit score by dozens of points overnight. The FCRA is dry as dirt, but it's an important and valuable document (a document that has saved me and my clients millions over the years) and you can read the whole thing here. 

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