The use of consumer credit reports is integral to the processing and approval of mortgage loan applications. Enacted in 1970, the Fair Credit Reporting Act (FCRA) was one of the first laws to protect consumers from unauthorized access to the use of consumers’ personal information.
Accuracy, Fairness, and Privacy
Congress enacted the FCRA to ensure the accuracy, fairness and privacy of consumers’ personal information that is assembled and used by consumer reporting agencies. The law creates special obligations and restrictions for credit reporting bureaus, agencies, and users of consumers’ personal information to protect the rights of consumers,
While processing mortgage loan applications lenders and mortgage brokers are “users” of the personal financial information provided by loan applicants on consumer reports. As users of consumer reports, we cannot obtain a copy of a report without certifying that we are requesting it for a permissible purpose.
One permissible purpose that a mortgage broker may have is “to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished. “… Involving the extension of credit to, or review or collection of an account of, the consumer” is one such permissible purpose.
For example, the mortgage broker would request a copy of the homeowner’s consumer report to process the mortgage application. The mortgage professional needs to certify to the consumer reporting agency that they were using the report for a permissible purpose.
The Fair Credit Reporting Act Protects You
Here’s a handy summary of the Fair Credit Reporting Act and the protections that it affords you as a consumer:
- You must be told if the information in your file has been used against you. If your application for credit, insurance or employment is denied, or another adverse action is taken, you must be notified and provided with the name, address, and phone number of the agency that provided the information.
- You have the right to know what is in your file. You may request and obtain all the information about you in the repositories of any of the consumer reporting bureaus/agency (your “file disclosure”). Every consumer is entitled to one free report each year from all three of the nationwide credit bureaus. There are other times when a free report is available. If the information in your credit report creates an adverse action against you, you can request a free report for review.
Additionally, a free credit report is available if you are the victim of identify theft and place a fraud alert in your file. Any one of the following can trigger this provision: your file contains inaccurate information as a result of fraud; you are on public assistance; or you are unemployed but expect to apply for employment within 60 days.
- You have the right to ask for a credit score. If your mortgage application requires a credit report, your credit scores must be disclosed to you. Otherwise, you may have to pay for them.
- You have the right to dispute incomplete or inaccurate information. If you find incorrect information in your credit file and report the same to the bureaus, they must investigate.
- Consumer reporting agencies must correct or delete inaccurate, incomplete, or unverifiable information. Within 30 days of being notified and supplied with acceptable documentation, inaccurate, incomplete or unverifiable information in your credit file must be removed or corrected.
- Consumer reporting agencies may not report outdated negative information. Agencies must delete negative information older than seven years or bankruptcies that are more than ten years old from the file.
- Your file access is limited. Not just anyone can look at your file. Only provide your info to someone with a valid, permissible need.
- You must give your consent for reports to be provided to employers, potential or current. Don’t ask me why the trucking industry is an exception.
- You may limit “prescreened” offers of credit and insurance you get based on information in your credit report. You may opt-out with the nationwide credit bureaus at 1-888-5-OPTOUT (1-888-567-8688).
- You may seek damages from violators. You may be able to sue in state or federal court for violations by users or agencies.
- Identity theft victims and active duty military personnel have additional rights.