II. Building a Credit Report
A credit report is like a financial biography of a consumer and for most consumers the story is
extraordinarily positive. Equifax, Experian, and TransUnion receive three billion updates every month
from 18,000 data furnishers on 200 million Americans. More than 90% of all consumers have no adverse
information on their files. For those consumers with information that is likely to be viewed as negative,
in general that information cannot stay on a credit report beyond seven years.
Credit reports will contain credit information, like car loans, credit cards, and similar items. Consumers
may also find preapproved offers of credit or insurance on their credit reports. By law, only that
consumer sees such offers, better known as inquires. No other lender, insurer, or other user is allowed to
see such non-consumer initiated offers of credit or insurance.
Just as important as what is on a credit report is what is not on a credit report. Credit reports do not
contain information about gender, race, religion, creed, color, national origin, or income.
1
Credit reports
also do not contain medical histories.
III. Credit Information and the Law
The federal Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq. heavily regulates the consumer
reporting industry, including those that furnish data to and use data from consumer reporting agencies.
The most comprehensive changes to the FCRA were in 2003 when Congress passed the Fair and Accurate
Credit Transactions Act of 2003 (FACTA or FACT Act). The FCRA, which now has over 23,000 words,
substantially controls the intake and output of consumer reporting data. Many states also have their own
credit reporting laws.
The touchstone of the FCRA is the accuracy obligation of consumer reporting agencies. The law requires
that consumer reporting agencies maintain reasonable procedures to assure maximum possible accuracy.
15 U.S.C. § 1681e(b). Determining what is accurate may sometimes be a challenge and may mean
different things to different people, but it is important to note that even the Federal Trade Commission
believes that credit reports cannot be completely error free.
2
A more thorough review of accuracy is
found in Appendix I.
In addition to the accuracy obligations imposed upon consumer reporting agencies by federal and state
law, federal law imposes restrictions on those that furnish data to consumer reporting agencies. For
example, furnishers cannot provide data they know or have reasonable cause to believe is inaccurate.
Furnishers are required to correct and update information. Id., § 1681s-2(a).
1
The committees should be aware of two studies in 2007 on credit scoring by the Federal Reserve Board and the
Federal Trade Commission. Among the Fed’s conclusions was this: “credit characteristics included in credit history
scoring models do not serve as substitutes, or proxies, for race, ethnicity, or sex”. In fact, “[c]redit scoring likely
increases the consistency and objectivity of credit evaluation and thus may help diminish the possibility that credit
decisions will be influenced by personal characteristics or other factors prohibited by law, including race or
ethnicity.” While the FTC’s study was focused on credit-based insurance scores, it too found that “[c]redit-based
insurance scores appear to have little effect as a ‘proxy’ for membership in racial and ethnic groups in decisions
related to insurance.”
2
16 C.F.R. Part 600 App. (2000). The Federal Trade Commission acknowledges that the law does not contemplate
error free consumer reports. If a consumer reporting agency accurately transcribes, stores and
communicates consumer information received from a source that it reasonably believes to be reputable and
which is credible on its face, the agency does not violate this section simply by reporting an item of
information that turns out to be inaccurate.