When you apply for credit, the process can seem mysterious, especially because lenders keep their exact approval criteria secret. While lenders don't have to tell you exactly how they came to their decision, you are entitled to know what information they used. Here's what you have a right to get when you apply for credit.
Free Copy of Your Credit Report
You have the right to obtain a free copy of your credit report from each of the three credit bureaus every 12 months. You can request them all at once, or you can request one every few months to see how your reports change over time (but note that each bureau may have slightly different information).
Right to a Copy of Your Report When Denied
If your credit application is denied, you have the right to obtain an additional free copy of your credit report from the bureau used by the lender. You should receive a letter explaining the general reasons for the denial and how to obtain your credit report.
This letter will include the name and address of the credit bureau and the creditor used to evaluate your application. You typically have 60 days to contact the credit bureau to receive a copy of your credit report.
Name of Who Has Received Your Report
You also have the right to know who has accessed your credit report. This includes creditors you submitted an application to, employers, your current creditors when they review your account and virtually anyone else who requests your credit file from the credit bureau.
You Can File a Dispute
The Fair Credit Reporting Act requires that your credit report contain complete and accurate information. You have the right to dispute any information that you believe is incomplete or inaccurate. This might include:
- an account that isn't yours,
- a debt showing as outstanding when you paid it off, or
- an incorrect account status.
When you file a dispute, the credit bureau will ask the creditor who reported the information for verification. Any incorrect or unverified information must be removed within 30 days.
You Can Add an Explanation
If you disagree with the outcome of a dispute, you can add a brief written explanation to your credit report. This will not affect your credit score, but credit analysts reviewing your credit report will be able to take it into account when making their decisions.
Outdated Information Must Be Removed
Your credit report should only contain relatively recent information. Generally, negative items must be removed after seven years, and bankruptcies must be removed after 10 years. Accounts that you closed in good standing usually remain on your credit report for 10 years.
Note that most credit scoring models give greater weight to more recent events. Even if a late payment is still reported after six years, it will have relatively little effect on your credit score compared to a late payment from within the last year.
You Must Continually Monitor Your Accounts
You only have a limited amount of time to dispute certain items such as charges to your credit card accounts. For example, if you stop using a credit card and someone puts a fraudulent charge on it, you must report the charge as fraudulent in a timely manner.
Under the Fair Credit Billing Act, you generally have 60 days from receiving your credit card statement to dispute a fraudulent charge. After 60 days, the charge is assumed to be yours and you're liable for paying it plus any interest and late fees that apply. If your credit card was reported as late, you also won't be able to dispute the late payment as inaccurate information.
Review all of your open deposit and credit card accounts at least monthly, and consider closing unused accounts.
To learn more, visit the FTC's Credit and Loans consumer information page.