Questions & Answers About Privacy & Your Credit Report

Privacy abuses are on the increase, including credit fraud and identity theft, a fast-growing crime in which an impostor applies for credit under a victim’s name. “Questions and Answers about Privacy and Credit Reports” offers in-depth information on privacy and credit reports, bank accounts and marketing as well as new laws designed to help people better control how their personal information is used.

Questions & Answers About Privacy & Your Credit Report

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Table of Contents

Introduction

Credit reports contain a wealth of personal information about consumers—Social Security numbers, addresses, payment status, employment, housing and legal information. Federal and state laws restrict access to your credit report to those who have a legitimate need to check your credit history, such as your current creditors, potential creditors and companies that wish to offer you credit. But despite the limits, there are ways that unauthorized persons obtain this information. For example, employees who work with credit reports have illegally accessed other people’s personal information and used it to commit fraud.

Personal financial information is more easily available and far less secure in the computer age than it was in the days of old-fashioned filing cabinets. This has resulted in an increase in privacy abuses, credit fraud and identity theft, a growing crime in which an impostor applies for credit under a victim’s name.

People usually don’t think about their privacy until it has been compromised. This guide contains suggestions to make people aware of the ways in which they can safeguard personal information. It explains why it is important to protect your privacy and how the credit reporting industry plays a role in privacy protection.

California residents are attaining stronger privacy protection through new laws and the creation of the state Office of Privacy Protection (www.privacy.ca.gov). The OPP provides information, advice and assistance on privacy issues to victims and the public. It also assists law enforcement by providing training, coordinating investigations and promoting sound privacy protection practices in the business community.

This publication was created by the national non-profit advocacy and education organization Consumer Action with a grant from the Rose Foundation.

About this Manual

“Questions and Answers about Privacy & Your Credit Report” is a training manual and group leader’s guide designed to give community advocates and outreach workers a background on this topic so that they can counsel clients and lead workshops for other staff members. It is intended to be used with “Privacy and Your Credit Report,” an easy-to-read, free brochure available from Consumer Action in Chinese, Korean, English, Spanish and Vietnamese. For more information, visit the Consumer Action web site (www.consumer-action.org), send an e-mail to [email protected] or call (888) 999-7981.

Many people do not realize the extent of the personal information about people that marketers have access to. As a community advocate or outreach worker, you are in a good position to help your clients understand the ways in which the law protects consumers from privacy abuses. Reading the brochure and this guide will give you valuable background information to assist you in counseling clients who have concerns about financial privacy.

Credit Reports

What is a credit report?

Your credit report is a record of all your credit card accounts and loans—your credit history. Most credit reports are compiled by three national credit reporting bureaus: Experian, TransUnion and Equifax.

Of all the personal records routinely used by businesses, credit reports contain the most detailed information about you. If you’ve ever had a credit card, car loan or mortgage, you’ve probably got a credit report.

What is in a credit report?

Your credit report contains a complete record of your credit history, including credit cards, car loans and mortgages. Late credit card, loan or other payments are reported to the credit reporting agencies by the companies you do business with. The credit reporting agencies add this information to your credit report on a regular basis.

Credit reports also contain facts to help businesses identify you, such as details about your past and present credit obligations, public records about you (if any) and a list of “inquiries”—the names of companies that have requested access to your credit report. A record of most of these inquiries remains on your report for two years.

In addition, your credit report includes your name, Social Security number, date of birth, current and previous addresses, employers and credit account numbers, balances and payment history.

What information is not supposed to be in my credit report?

Your credit report can’t contain medical information*, negative credit history information, bad debt that are more than seven years old or a bankruptcy that is more than 10 years old. If your report has been requested by a prospective or current employer, information about your age, marital status or race cannot be included. *A specialized medical information report is marketed by the Medical Information Bureau (MIB) for use by medical insurance companies. Generally speaking, only 20% of consumers have a record with MIB. You have a right to review your MIB file if one exists (www.mib.com).

Who compiles my credit report?

Credit reports are compiled by companies called credit reporting agencies or bureaus. Three major national companies—Experian, TransUnion, and Equifax—gather and maintain most of the credit information on file today. The information is provided by lenders and credit grantors, such as credit card companies, banks and finance companies.

Credit reporting bureaus are accountable to the Federal Trade Commission (www.ftc.gov) and operate under the federal Fair Credit Reporting Act and state laws. Credit reporting regulations are designed to safeguard the privacy of information in credit reports and to guarantee that the reports are accurate.

Who has access to my credit report?

Under the federal Fair Credit Reporting Act, access to your credit report is limited to businesses or people with a legally recognized need. Lenders, landlords, employers and insurers are all authorized to use your credit report as a means of checking your credit history and verifying information about your application for credit, insurance, employment or a rental. Your specific consent is required before your credit report can be provided to employers or when the report contains medical information.

Businesses that access your credit report have a responsibility under the law to safeguard the information.

In most cases, you must sign an application before a business can check your credit. Read all documents carefully before you sign them, since the notice that you are granting access to your credit report is often buried in fine print. Companies that use your credit report as a reason to turn you down for a rental property, credit or insurance must notify you about the reason for the denial. This legally mandated disclosure notice is called a “notice of adverse action.”

For some sensitive or executive positions, employers may order “investigative consumer reports” which include interviews with your friends, acquaintances, neighbors and business associates. You must be notified in writing and give your written permission before a report can be compiled. You can request a copy of the report any time within two years of the report filing.

How can I ensure that a business doesn’t misuse my personal information?

Whenever a business wants to check your credit (or asks for your Social Security number), make sure you ask why it is necessary and how the business safeguards sensitive personal information about its customers or potential customers. If you do not get a satisfactory answer about records storage and disposal, do not allow the firm to run a credit check.

If you find that a company recklessly used your information or failed to take precautionary safeguards, you may sue in federal court for damages resulting from violations under the Fair Credit Reporting Act. Plaintiffs are entitled to recover court costs and reasonable legal fees as well as punitive damages for deliberate violations.

How long does information remain in my credit report?

Most information remains in your credit report for seven years. Bankruptcies appear in your credit report for up to ten years.

How can I obtain a copy of my credit report?

You can get a copy of your credit report by contacting one or more of the three major credit reporting agencies. Copies typically cost about $10 each. (See "For More Information" section for contact information.)

It is wise to monitor reports from all three credit reporting agencies, because they each track your information a bit differently. Review copies of your credit report from each agency at least once every six months to a year or before you apply for credit.

If you have been turned down for credit, a rental, a job or insurance within the last 60 days and you were told that your credit report was used to make the decision, you can obtain a free copy of your credit report from the credit reporting bureau that provided the information. In addition, you may be able to get a free copy if you receive public assistance, are unemployed and plan to seek employment within 60 days or if you believe your report contains inaccuracies resulting from fraud.

I got an e-mail saying I can get a free copy of my credit report. What’s the deal?

Some companies offer free copies of your credit report if you sign up for a 30-day free trial for services such as credit report monitoring. Offers such as this often require that you give your debit or credit card number. If you take advantage of such an offer, make sure you call within 30 days to cancel the service or you will be charged. Write down the name of the person you spoke with and a confirmation number when you cancel.

How can I find out if there is negative information in my report?

Order a copy of your credit report and check it carefully at least once a year. You should also check your credit report when you plan to apply for credit, rent an apartment or apply for a job. You don’t want to be surprised by negative information in your report, especially if that information is inaccurate.

If I have bad credit, how can I improve it?

If the poor credit is of your own doing, only time and improved credit maintenance habits will help. If your credit has suffered due to fraud, you can contact the credit reporting agencies and follow up with them to make sure any errors or fraudulent claims have been corrected.

Credit Scoring

What is a credit score?

Many companies use credit scores to determine whether you are a good credit risk. The three major credit reporting agencies use slightly different formulas for calculating your credit score. Your credit score is affected by many factors including how you’ve handled credit card and loan payments, how many times you’ve applied for new credit or loan applications in the past two years, how many credit accounts you have, the length of time you’ve had credit and how much outstanding debt you carry.

Where can I find out what my score is?

You can purchase your score for $12.95 at the MyFICO web site (www.myfico.com). Credit scores range from about 300 to 850. Your credit score is not set in stone. It can get better or worse over time depending on how you handle credit.

According to MyFICO, about 40% of U.S. consumers have the best scores—those above 740.

Investigative Consumer Reports

What is an investigative consumer report?

Investigative consumer reports are much more detailed than credit reports and are compiled by insurance companies, employers and landlords. These reports may contain information on your character, reputation, personal characteristics and life style. This information may be gathered through personal interviews with neighbors, friends, associates or acquaintances, as well as a search of public documents such as property and court records.

Federal and California laws impose stricter regulations on credit bureaus that compile investigative reports. An investigative consumer report can only be used in limited circumstances, including employment, insurance and rental housing decisions. You have the same rights to correct and dispute incorrect or incomplete information in an investigative report as you have with your credit report.

Am I supposed to be informed if an investigative consumer report is being prepared about me?

Generally, the law requires that the company requesting an investigative consumer report must inform the subject in advance. But an employer does not have to tell an employee when the report is going to be used to consider a promotion, or firing or when an employee is being investigated for suspected criminal activities.

Checking on your checks

What is a check verification system?

When you pay by check, merchants access an electronic system to see if you have a history of writing bad checks. Check verification companies keep databases with the names and checking account numbers of people who have written bad checks or had their accounts closed because of unpaid bad checks. When you write a check, the salesperson screens the check by running it through an electronic verification terminal that compares your checking account number and your driver’s license number and looks to see if you have written any bad checks.

What is ChexSystems?

ChexSystems is a national company that compiles information on closed checking accounts and sells it to banks for screening purposes. You can write to ChexSystems to see if you are in its database and if so, request to have a copy of your report mailed to you for a fee. Information about your closed accounts remains in the ChexSystems database for five years unless you can prove it is inaccurate. Write to ChexSystems, Consumer Relations, 12005 Ford Rd., Ste 600, Dallas, TX 75234. You can also order a report online (www.chexhelp.com).

Can I get a free copy of my ChexSystems report?

Yes. If in the past 60 days you have been told that you cannot open a bank account because of information provided by ChexSystems, you can order a free copy of your report. In addition, you may be able to get a free copy if you receive public assistance, if you are unemployed and plan to seek employment within 60 days or if you believe your report contains inaccuracies resulting from fraud.

Are checking account database companies subject to credit reporting laws?

Yes. These companies must comply with California and federal credit reporting laws.

Credit Reports and Fraud

What is identity theft fraud?

Identity theft occurs when someone appropriates your personal information without your knowledge and uses it to fraudulently obtain credit or other services under your name. If key information about you from your credit report—such as your Social Security number or date of birth—falls into the wrong hands, a crook can use it to get a driver’s license, apply for credit cards, set up instant credit accounts at stores, buy goods on credit and obtain cars and real estate. In 2001, more than 85,000 cases of identity theft were reported nationwide, according to the Federal Trade Commission

How do identity thieves gain access to credit information?

Identity thieves obtain personal financial information in many ways, including stealing wallets or purses, hacking into Internet sites and sifting through dumpsters for un-shredded mail or corporate financial records. They may also look over your shoulder or even videotape you when you enter your pin number at an ATM or other location.

What kind of damage can an identity thief do to my credit report?

Victims can go for years without knowing that someone has stolen their identity—many find out when they apply for new credit and are denied because of overdue bills they never knew about.

It can take years to correct the damage done by an identity thief. In the past, consumers have been virtually alone in dealing with the many issues that arise from identity theft, but laws are being passed to help prevent ID theft and assist victims.

What if I find mistakes in my credit report or discover I am a victim of identity theft?

State and federal laws give you the right to correct errors on your credit report. The credit reporting bureaus provide information with your credit report to help you request an investigation into items you believe are wrong. Once you make a request, the investigation into the disputed information should be completed within 30 days. If the investigation is not settled in your favor, you can submit a 100-word explanation of the problem that will be included in your credit report.

If you are a victim of credit fraud, you are not liable for losses caused by the fraud. But many times it happens without your knowledge and can destroy your credit and make it difficult if not impossible to obtain new credit. Many victims report that it can be a long and difficult task to clean up the damage done by a criminal impostor.

In California, it is a felony to use information about another person without his or her authorization to obtain credit, goods, services or medical information. California state law requires that credit reporting bureaus block information that appears on your report as the result of identity theft.

Also in California, local police or sheriffs’ offices are required to create a police report for victims of ID theft, even if the crimes occurred elsewhere. A police report is often required when ID theft victims contact creditors to dispute unauthorized debts. State law also gives victims and law enforcement agencies the right to access information about fraudulent accounts as well as other commonly restricted information that might help them prove a case of identity theft.

The Office of Privacy Protection (www.privacy.ca.gov) under the California Department of Consumer Affairs is a new resource for victims of identity theft as well as people who want to prevent becoming victims.

What is the California ID Theft Registry?

The California Department of Justice has established a database of identity theft victims that is accessible by victims and law enforcement. Registration can help you prove your innocence if you are charged with a crime committed by someone using your identity or if your identity has been associated mistakenly with that of a convicted criminal.

To register, complete the Department of Justice registration packet. (See "For More Information" section for contact information.) Once the information in your application is confirmed, a file is created for you in the statewide database. Your file can be accessed by you and other people whom you authorize using a toll-free number provided by the Department of Justice.

How can I safeguard myself from identity theft?

No one is completely immune from this crime, but there are several steps you can take to minimize the chances you will become a victim of identity theft or credit fraud. To safeguard your information, check your credit report annually, keep your Social Security card in a secure place and shred all mail you receive containing personal information before you discard it. Don’t carry all your credit cards with you. Cover the keypad when you enter your payment card’s PIN (personal identification number) at ATMs and store terminals.

How can I monitor my credit report?

You have a right to purchase your credit report at any time. This can help you monitor your credit report and credit cards, correct mistakes and make sure you have not become a victim of fraud. Monitoring your credit report will not stop fraud, but it will help you catch the problem early and allow you to report it to law enforcement.

Go over the reports carefully to make sure they don’t include credit cards and accounts that you didn’t open. Order reports from the three credit reporting bureaus at least once a year to make sure they’re accurate. (See National credit reporting bureaus section for contact information.) Since each company’s report might differ, check all three.

It’s also a good idea to check your credit report before shopping for a mortgage or a new car, entering into a rental agreement, applying for a job or seeking an insurance policy. You’ll avoid surprises and have time to correct errors or get back on track with late payments before you apply.

There is a $10 fee for each report, but you can get your credit report free from at least one of the agencies if you have been denied credit or are a fraud victim. You can also ask for a free copy if you are unemployed and plan to apply for employment within 60 days or if you are on welfare.

Credit Reports and Marketing

How can I opt out of pre-approved credit offers?

Many people receive pre-approved credit offers in the mail but not everyone is aware that crooks steal the offers and use them to get a credit card with your name on it sent to another address. Dispose of all offers carefully or “opt out” (choose to stop receiving) them completely to cut the risk of identity theft. To opt out pre-approved credit offers, call (888) 567-8688 (5-OPT-OUT).

Are the financial institutions I do business with allowed to give my account number to third parties for use in marketing?

No. Banks are prohibited from disclosing credit card, deposit or other transaction account numbers to outside, unaffiliated companies for use in telemarketing, direct mail marketing or electronic mail. They may disclose customers account numbers to credit reporting agencies, companies that provide services to the banks such as bookkeeping or check printing, their affiliates to market their own products or a third party participant in a private label credit card program.

Is there any way to get my bank and other financial services companies to stop sending me junk mail?

Read the company’s “privacy notice”—which is required to be sent to you once each year—to opt out of receiving pre-approved credit card offers. You must contact each individual company to opt out of its marketing programs.
In the notice, the company must tell you:

  • if it discloses, sells, shares or trades any personal information about you to nonaffiliated third parties.
  • about your right to opt out of third-party marketing programs.
  • how you can opt out, whether it be in writing or by calling the bank.

What information is allowed to be sold by credit reporting bureaus?

Credit reporting agencies are allowed to add your name to lists they sell to companies that market pre-approved credit and insurance offers, but they are prohibited by the Fair Credit Reporting Act from selling credit report information to companies that want to sell you anything else.

Credit reporting agencies are allowed to sell what are called “credit headers” from your credit report. A credit header includes your name, current and previous address, phone number, date of birth and Social Security number. You cannot opt out of this practice. The sale of credit headers is highly controversial. Several bills have been introduced in Congress to prohibit the sale of headers or at the very least to restrict the sale of Social Security numbers, which are contained in credit headers.

Freezing Your Credit Report

Can I freeze my credit report so that no one can set up credit under my name?

A new law allows California residents to ”freeze” their credit reports, which prevents credit reporting agencies from giving potential creditors access to your file. The law is designed to help you reduce the risk of identity theft by gaining control over your credit. If your credit report is frozen, a crook who has your name and Social Security number or other identifying information will not be able to get credit in your name.

If you freeze your report and later want to apply for new credit, you can “thaw” it temporarily with a special personal identification number (PIN) from the credit reporting agency.

Is there a downside to freezing my credit report?

Credit reporting agencies have made it an expensive and complicated process to freeze and thaw credit reports. The three major credit bureaus charge for this service, but victims of identity theft who provide police reports do not have to pay. To fully protect yourself, freeze your records at all three companies—which costs just over $100. Equifax and TransUnion charge lower fees than Experian to freeze the records but they have additional fees to thaw the records when you apply for new credit. All three companies require freeze requests to be in writing—Experian and Equifax say you must send them via certified mail.

National Credit Reporting Bureaus
Equifax Experian TransUnion
P.O. Box 740241
Atlanta, GA 30374
Box 2104
Allen, TX 75013-2104
P.O. Box 1000
Chester, PA 19022
(800) 685-1111 (888) 397-3742 (800) 888-4213
www.equifax.com www.experian.com www.transunion.com

For more information

California Department of Justice
Identity Theft Registry
(888) 880-0240
Web site: http://caag.state.ca.us/idtheft

California Office of Privacy Protection
(866) 785-9663
Web site: www.privacyprotection.ca.gov
E-mail: [email protected]

Federal Trade Commission
Office of Consumer Protection
(877) 382-4357
Web site: www.ftc.gov/privacy
E-mail: [email protected]

Privacy Rights Clearinghouse
Web site: www.privacyrights.org

“Privacy and Your Credit Report” was created by Consumer Action with funding from the Rose Foundation.

Published / Reviewed Date

Published: June 24, 2003

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Filed Under

Credit   ♦   Credit Fraud   ♦   Credit Reports/Scores   ♦   Credit Scores   ♦   Fraud/Scams   ♦   Privacy Rights   ♦  

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