Yes, in most cases it’s illegal to check someone else’s credit report. The Fair Credit Reporting Act (FCRA) is a federal statute that defines and limits who can receive credit-related information. The act lists legal reasons why someone’s credit can be checked; therefore, it is illegal for an individual or organization to check someone’s credit report for any other purpose.
We’ll do a deep dive into when it’s OK to run a credit check on someone, and what to do if you suspect someone has pulled your credit report without permission.
Can Anyone Check Your Credit?
The short answer is no. Legally speaking, a person or organization can check your credit only under certain circumstances. Someone either needs to have what’s called “permissible purpose” or have your permission and cooperation in the process for the credit check to be considered legal.
Who Can Access Your Credit Report?
People and organizations that can legally access your credit report under certain circumstances include the following:
- Banks and other lenders
- Utility companies
- Insurance companies
- Landlords
- Employers
Here’s more about each.
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Banks and Other Lenders
A financial institute can check someone’s credit in connection with credit-related transactions, such as when they apply for a mortgage or car loan. Note that section 609(g) of the FCRA requires financial institutions that arrange mortgage loans and use credit scores in their decision making to provide the credit score and additional information to the applicant.
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Utility Companies
Although it may not be commonly thought of in this way, applying for utility service is a form of credit. So when someone requests service from an electric company, the utility will likely check the person’s credit history. If the individual doesn’t have at least a fair credit score, the company can request a deposit or even deny service.
Recommended: Understanding Credit Score Rating Scales
Insurance Companies
Insurance companies have permission to review an applicant’s credit information. Note that companies must also comply with state laws as they use the credit data to underwrite policies.
Landlords
The Federal Trade Commission notes that landlords have the right to review consumer credit reports when someone applies to rent from them or renews a lease. A landlord must certify to the credit bureau (such as Equifax, Experian, or TransUnion) that they will only use this information for rental purposes.
Employers
A potential employer can check an applicant’s credit report, although the company must give the applicant notice of their intent and get written permission. State laws vary regarding an employer’s ability to use this information as part of a hiring decision.
When Is It Legal To Run a Credit Report on Someone?
There are a handful of legal reasons to run a credit report on someone.
Permissible Purpose
This umbrella term used in the FCRA describes when a credit reporting agency can provide a credit report.
Proxy Ordering
“Proxy” is a legal term for someone with the authority to represent someone else. The only instance that isn’t proxy ordering is when a consumer requests their own credit report.
To pull your report, a proxy will need to get answers to questions that only you should know — information that comes directly from your credit report. This provides an extra layer of protection to ensure that your permission is freely being given.
Deceased Spouse
An individual can send a letter to a credit agency requesting the credit report of a deceased spouse. The surviving spouse will need to provide information about both parties so that the agency can verify identities and ensure that it’s OK to provide the credit report.
During Mortgage Underwriting
The FCRA notes that a financial institution can obtain a credit report for “extending, reviewing, and collecting credit.” This applies to mortgage underwriting as well as other types of loans.
Screening Job Applicants
With permission, an employer can request and review a credit report for the purpose of “evaluating a consumer for employment, promotion, reassignment or retention as an employee.”
During Insurance Underwriting
An insurance company can check a person’s credit report, with permission, as part of the underwriting process for a policy. The FCRA delves into specifics for different types of insurance: life, health, homeowners, etc.
Evaluating Prospective Tenants
The FCRA states that a potential landlord can pull a credit report with the prospective tenant’s permission.
Court-Appointed Guardians
Court-appointed guardians can request a copy of their ward’s credit report by mail. They must provide information about themselves as well as the ward.
What To Do if Someone Pulls Your Credit Without Permission
Contact the organization that pulled your credit to rule out that it was done in error. Then contact the three credit bureaus and request that any hard credit inquiries be deleted from your credit report.
You can also submit a complaint to the Consumer Financial Protection Bureau (visit https://www.consumerfinance.gov/complaint/) and ask for any problems associated with the inquiry to be resolved.
Who Can Check Your Credit Without Permission?
Government agencies may check your credit report to process an application for a license, to determine if you qualify for public assistance, or to calculate what a person can pay in child support, among other reasons.
If you already receive credit from a company, it may periodically check your credit report. Language giving them permission is likely in their terms and conditions. Debt collectors may also get access to information on credit reports.
How To Know if Your Credit Was Checked
All hard inquiries will appear on your credit report for two years, so you can find the information there. Soft checks may or may not appear. Each year, you can get a free copy of your credit report — and find out your credit score for free — via AnnualCreditReport.com.
If you’re concerned about credit checks, consider signing up for a credit monitoring service. What qualifies as credit monitoring varies from service to service; look for one that sends out alerts for new hard inquiries.
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How a Credit Check Affects Your Credit Score
A soft inquiry will not hurt your credit score even if it appears on your report. A hard inquiry can lower the score by up to five points. Although the inquiry will remain on your credit report for two years, it will stop affecting your credit score after 12 months. Applying for several credit accounts in a relatively short amount of time may pose a greater risk. (Find out more about what affects your credit score.)
Can You Stop Someone From Getting Your Credit Report?
You can freeze your credit at all three bureaus, which will prevent them from sharing information with businesses that make inquiries. However, if you want to apply for a loan or otherwise conduct a transaction that requires a credit check, you will need to unfreeze your credit.
The Takeaway
The Fair Credit Reporting Act (FCRA) provides legal guidelines on who can and can’t check consumer credit reports. Certain individuals can check your credit with your permission, including landlords and employers. Banks, insurers, lenders, and utility companies may also pull a credit report if you’ve applied for credit or service with them. In some circumstances, government agencies may request your credit report without your permission. In general, an average citizen cannot check someone else’s credit report unless they are serving as a legal proxy.
FAQ
Can I sue for an unauthorized credit check?
Consult an attorney to discuss potential legal remedies. If you discover that your credit was run inappropriately without your permission, contact all three credit bureaus to ask them to remove the inquiry so that it doesn’t harm your credit score. You can also file a complaint with the Consumer Financial Protection Bureau at https://www.consumerfinance.gov/complaint/
What is a violation of the Fair Credit Reporting Act?
There are multiple types of FCRA violations. They include instances when a credit bureau provides your information to someone who is not authorized to receive it, didn’t demonstrate a valid need for the data, or didn’t get your written permission in advance.
How do I find out who ran my credit?
You can get a free copy of your credit report from each of the three bureaus annually at AnnualCreditReport.com. Your credit report lists all hard credit inquiries from the past two years, and potentially some soft inquiries.
Learn More:
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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Are you living beyond your means? Here’s how to tell
Living beyond your means is an easy trap to fall into. And if you’re not keeping close track of everything that’s coming in and going out of your financial account, you may not even realize you’re doing it. But if you often run out of money before the month is over and you don’t know exactly where all the money is going, it could be a sign that you’re living above your means.
Over time, living a lifestyle beyond what you can actually afford can lead to mounting debt and also keep you from reaching your financial goals.
Related: Budgeting for basic living expenses
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Simply put, ”living above your means” means that you are spending more money than you are earning. People are able to do this by relying on credit cards, loans, and pior savings to cover their expenses. However, the process is not sustainable, and eventually overspending is likely to catch up to you.
Living beyond your means can also mean that you’re spending everything you bring in, and, as a result, don’t have anything left over for saving or investing, such as building an emergency fund, saving for a short-term goal like buying a car or a home, or putting money away for retirement.
Here are 10 red flags that you’re living a lifestyle you simply can’t afford — and tips for how to get back on track.
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If most or all of your paycheck is spent immediately on bills and you don’t have anything left over at the end of the month to put into savings, you are likely living over your means and may need to make some adjustments. If your current lifestyle has become a habit, you may feel there is no place to cut back. However, if you get out your monthly statements for the past three months and take a close look at where all your money is going each month, you will likely find places where you can cut back on spending.
This might be ditching cable, cooking (instead of ordering take-out) a few more times per week or quitting the gym and working out at home.
AndreyPopov/istockphoto
If you’ve been putting a lot of your expenses on your credit card and/or don’t always pay your bills on time, you may see your credit score take a hit. This number is important because it can be accessed by anyone considering giving you new credit and may be used to determine the interest rate you’ll pay on a home or car loan, and also new credit cards.
If you aren’t sure what your credit score is, you can get a free copy of your reports from all three credit bureaus. Looking it over can help you understand why your credit score has dropped, and help you take the necessary steps to repair it.
For example, you might set up automatic payments for the minimum amount due on credit card bills and loans so you never miss a payment. You may also want to pay down your balances on your credit cards and lines of credit. This can lower your “credit utilization rate” (how much of your credit limit you are using), which is factored into your score.
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If money is feeling a little tight, you may feel that now is not the time to worry about retirement. But you likely won’t be able to work forever, so it can be wise to make saving for retirement a priority and to get started early.
Thanks to compounding interest (which is when the interest you earn also starts earning interest), the earlier you start investing in a retirement fund, the easier it will be to save enough money to retire well. You don’t have to contribute a lot; even just putting aside a small amount of each paycheck into a 401(k) or IRA each month can help you build wealth over time.
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Keeping your rent or mortgage below 30 percent of your monthly pre-tax income is sometimes recommended because it can leave you with enough income left over to save, invest, and build wealth in general.
Staying below 30 percent can be difficult, however, if you live in a region of the country where the cost of housing is high. Nevertheless, spending a lot more than a third of your income on housing can leave you “house poor” and put your other financial obligations at risk.
If you find that your housing costs are taking too large a chunk of your monthly paycheck, you might consider downsizing, taking on a roommate or finding a way to increase your income with a side hustle.
Depositphotos
Another sign you may be living beyond your means is that your savings have stagnated. Making regular deposits into your savings account in addition to your 401(k) or IRA allows you to work towards your short- and medium-term financial goals, such as putting a downpayment on a home or a car or going on vacation.
Suwanmanee99 / istockphoto
An overdraft fee, or “non-sufficient funds fee,” is charged when there’s not enough money in your account to cover a check or debit card payment. Mistakes happen, and a one-off overdraft isn’t necessarily an indicator of overspending. But repeat offenses can be a sign that you are living too close to the edge and don’t have a clear picture of how much money is going into your account and how much is going out.
You may want to start tracking your spending and keeping a closer eye on your spending account to make sure you always have enough to cover your electronic payments.
istockphoto
Many people think making and following a budget will be too complicated. But having a budget can actually simplify your spending decisions by letting you know exactly what you can and can’t afford.
Having a budget also helps to ensure you have enough money to cover essentials, fun, and also sock some away in savings. If you’ve never set financial parameters for yourself, you may want to consider taking an honest inventory of how much you are bringing in each month and how much is going out each month.
Once you get a sense of your own patterns and habits, you can work toward building a realistic budget that allows you to spend and save more wisely.
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Leasing a vehicle you would not be able to purchase outright or finance can be a major financial red flag. Leasing lets you rent a high-end lifestyle, but many people end up with leases they really can’t afford.
You might be covering your monthly payments, but if you can’t do that while meeting your other expenses and also putting money into savings, then your car is likely too expensive.
You may want to consider downgrading your vehicle or saving up enough money to buy a car — either outright or by making a solid downpayment so your monthly payments are low.
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It’s fine to use your credit card to pay for everyday expenses and the occasional big purchase. But if you can’t pay off most of the balance each month, you’re likely living beyond your means.
Rather than give over part of your paycheck just to interest each month, you may want to cut back on nonessential spending and divert that money toward paying off your balances.
Rawpixel / istockphoto
Not having a stash of cash you can turn to in a pinch can be a sign that you’re overspending. You may be gambling on the fact that nothing will go wrong. But life is unpredictable, and getting hit with an unexpected expense you can’t pay for can lead to a financial crisis.
Instead, you may want to build an emergency fund that can cover three to six months worth of living expenses. That way, you’ll be covered should something happen, such as an illness or injury, job loss, housing issue or any other expensive personal matter should come up.
AleksandarGeorgiev
Unfortunately, living beyond your means is all too easy to do. And while a few weeks or months of spending more than you earn may not be a major problem, overspending on a regular basis will likely catch up to you in the form of high debt and neglected savings.
Creating (and sticking to) a spending budget can help ensure that you can afford your bills and basic expenses, and still have money left over to save for the things you want in the future.
Learn more:
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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