Consumer Credit Reporting Agencies

When a landlord, employer or loan officer asks you for permission to run a credit check, he will usually use the services of a consumer credit reporting agency. These agencies collect information about your financial behavior from numerous sources, including your creditors and court records. Because the information that they collect and provide to others is so sensitive, there are numerous state and federal laws that govern their business practices.

The Big Three

In the United States, the three largest consumer credit reporting agencies (also known as "credit bureaus") are Experian, TransUnion and Equifax. When you give an individual or company permission to check your credit, they will almost always be looking at a credit report from one or more of these three companies.

Federal Laws

Federal laws govern the ways in which credit reporting agencies do business. The most significant laws include the Fair Credit Reporting Act (FCRA) and the Fair Credit Transactions Act (FACTA). These laws regulate who has access to your credit report, what you can do to challenge wrong information, how long negative information can remain on your report, and gives both recourse and protections to victims of identity theft.

State Laws

Some state laws place additional restrictions on the use of consumer reports as well as the information that can be placed on them. Two good examples of state law that offer consumers additional protections are California's Investigative Consumer Reporting Agencies Act (ICRAA) and the Consumer Credit Reporting Agencies Act (CCRA). Under the ICRAA, consumer reports are restricted with a few exceptions, such as how long a criminal conviction can be reported. The FCRA has no such restrictions. The CCRA requires employers to notify employees each time they run a credit or background check, unless they are investigating employees for wrongdoing. Under the FCRA, once an employee gives an employer permission to conduct a credit or background check, the employer does not need to notify the employee if it later requests additional reports.

Other Reporting Agencies

In addition to the three major consumer credit reporting agencies, there are several other consumer reporting agencies that specialize in specific types of information. For example, ChexSystems monitors a consumer's banking behavior and can let a bank know whether an individual has a past history of bouncing checks. MIB Group is an insurance reporting agency that keeps records of an individual's use of health insurance. Central Credit reports on gambler's debts. According to the FCRA, a "specialty" consumer reporting agency's reports are used by its clients to make decisions about housing, employment or insurance; these agencies are subject to FCRA rules.

Being Proactive About Credit

Because credit bureaus rely on third party information to compile their reports, wrong information can make its way into your file. Federal law requires that each of the major credit reporting agencies provides you with a free copy of your credit report on an annual basis. If you are turned down for credit, housing or employment on the basis of your credit report, you are entitled to another free copy of your report. If you find that your credit report has errors, contact the credit bureau that issued the report and request an investigation. Keep in mind that it can take weeks, even months, to remove bad information from your credit report. If you are planning to apply for a new job, rent an apartment or apply for a loan, check your credit as early as possible before completing an application. Doing this can help prevent nasty surprises and give you a chance to have any errors removed.