Under the Fair Credit Reporting Act (FCRA), credit reporting agencies are legal in the United States but must follow specific laws, according to the Federal Trade Commission (FTC). Even if you did not pay a debt such as a credit card bill as promised, credit reporting agencies must follow the applicable federal codes.
Significance
Almost every type of debt, whether paid on time or placed into collections because of nonpayment, could potentially end up on your credit report, according to both the FTC and the credit reporting agency Experian.
Function
Credit reporting agencies furnish information to companies considering extending employment or credit to an applicant, according to both the FTC and Experian. You can also access your own credit information, upon identity verification, for free once a year under federal laws.
Time Frame
The FCRA governs just how long negative information can be reflected on your credit reports. Generally, unpaid debts in collections, late payments and Chapter 13 bankruptcies can only legally reflect on your credit reports for 7 years from the date of delinquency. Some types of debt issues, such as Chapter 7 bankruptcies, can stay on your report for 10 years.
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