A free credit rating report is an excellent resource for evaluating your creditworthiness. It is prepared by assessing the past and present financial information and the current status of assets and liabilities. However, a credit rating report is not restricted to personal credit ratings, rather it encompasses:
· Corporate credit rating
· Sovereign credit ratings
· Short term ratings
Laws Governing Free Credit Rating Report
The provision of free credit rating reports is governed by several laws and acts, to avoid scams and frauds. In addition, such guidelines enforce the right methods for the assessment of an individual’s creditworthiness. Some important laws that administer the free credit rating report practice are:
Credit Rating Agency Reform Act
The Credit Rating Agency Reform Act was established for the improvement of credit rating quality and for safeguarding the interest of common people as well as lenders at the same time. The introduction of this Act helped to bring about a sense of responsibility, clarity and competition in the credit rating industry.
An important component of the Credit Rating Agency Reform Act is the mandate for credit bureau registration. Every national credit reporting agency is required to get itself registered, by furnishing a formal application. This application contains information about the bureau. This includes the process of credit rating computation and security policies for the prevention of information misuse.
The Fair Credit Reporting Act (FCRA)
This is a federal law which helps to determine the compilation, distribution and usage of the available individual credit information. Hence, it provides the basis for the credit rights of consumers. An individual’s credit report can only be furnished to prospective creditors and other genuine parties that are affected by his/her financial health, such as potential landlords.
Violation of the FCRA can lead to legal repercussions, as the individual can file a suit in federal or state court to enforce the Act. Moreover, s/he can also claim statutory damages for the same.
Free credit rating report practices are also subject to the Credit Repair Organizations Act. This helps to protect consumers from fraudulent practices of credit repairing companies. The law requires the credit repair companies to provide their clients with a copy of the “Consumer Credit File Rights Under State and Federal Law,” so that they are aware of their rights. The law also encompasses specific consumer protection policies, such as a credit repair company will be held liable for false claims about its services and performing any service without the client’s consent.