Why Checking a Person's Credit History Is Illegal

Your credit history is one area of your life where a total stranger can view nearly everything you do. Federal regulations govern consumer credit checks, so running a credit report can violate the law. Most credit checks are legal, because the party running the check usually gets a person's consent as well the information to run a check from the consumer.

When a Credit Check is Legal

Someone can check your credit if you consent to releasing your report. After receiving your consent, an ndividual or entity checking your credit must only do so in connection to underwriting insurance, employment, professional licensing, issuing credit or some other business need. Credit checks due to business need must have relevancy. For instance, a credit check would be prudent for a bank teller, but probably not for a ditch digger.

Illegal Credit Checks

Creditors and other parties with a legitimate business need usually request your signature to prove consent. Just giving someone information needed to run a credit check -- a driver's license contains most of information needed to run a credit check -- does not usually count as consent. As of June 2011, the Federal Trade Commission levies a fine of $2,500 per unauthorized credit check. In extreme cases of disregard for the Fair Credit Reporting Act, someone can go to jail for an illegal credit check.

Preventing Illegal Checks

Always ask a creditor if he plans to run a credit check. Some creditors can run a credit check with a consent, known as a soft credit check. Soft credit checks do not hurt a credit score -- a request for credit hurts a credit score up to a few points. Only the consumer can see soft credit checks when he runs a report on himself.

Removing an Illegal Credit Check

Any credit check should appear on a credit report with Equifax, Experian and TransUnion. The FTC requires these companies to furnish one free credit report each year via Annual Credit Report. Consumers should dispute a suspected unauthorized credit check with the bureaus themselves, but disputing the check with the creditor may be a faster way to remove it. Any credit inquiry leaves a credit report after two years and stops affecting a credit score one year after it appears on a report.