Impermissible Credit Report Use

You might think that your credit reports are relatively private, so you could be surprised to learn that more than just your bank or creditors can get access to them. However, the federal Fair Credit Reporting Act (FCRA) (15 U.S.C. § 1681 and following) and state credit reporting laws restrict who can access your credit reports and how they can be used.

These laws allow only certain entities to access your credit reports in specific situations. They also restrict how your credit information can be used. Still, quite a few businesses and entities, beyond the usual credit card issuers and other lenders, are allowed to order your reports.

Who Can Look at Your Credit Reports

According to the FRCA, the following people and entities can request your credit reports.

Creditors and Potential Creditors (Including Credit Card Issuers and Car Loan Lenders)

These people and businesses can review your report when you apply for credit or to monitor your credit once they've given you a loan or credit, subject to some restrictions. For example, for a new transaction, you must have made an offer or initiated a credit transaction before the creditor can review your report.

Mortgage Lenders

If you're seeking to borrow $150,000 or more, mortgage lenders can see some information—in particular, older information—that wouldn't be provided to other creditors.

Landlords

Landlords might get a report from a specialty consumer reporting agency that tracks rental histories, including evictions.

Utility Companies

However, state rules often prevent utility companies from denying you service in many circumstances, even if you have bad credit. To learn about programs and laws that can help you avoid utility disconnections, see this article on preventing a utility shut-off.

Student Loan Lenders

As of July 1, 2010, the government makes federal student loans directly; private lenders don't offer them. Generally, you can't be denied a direct federal student loan based on your creditworthiness. But credit will be checked for PLUS loans. Also, you can't get a new federal loan if you're in default on another federal loan unless you've made satisfactory arrangements to repay it.

Lenders of private student loans (those not offered by the government) can use credit reports to make loans or monitor existing loans.

Insurance Companies

These companies can look at your reports if you apply for a policy. Usually, they're not interested in your credit history but instead may ask about your medical history or any insurance claims you have filed. A credit reporting agency can't provide an insurance company with a credit report that contains medical information unless you consent.

If you're seeking life insurance for $150,000 or more, the insurance company can see older information that wouldn't otherwise be included in your credit reports.

Car Insurance Companies

These companies often use credit information to help determine how much to charge when offering a new policy.

Employers

Tens of thousands of employers review credit reports to evaluate job candidates. Employers use this information to judge financial honesty and integrity and the risk of bribery of people with a lot of debt.

And, once you're hired, employers can use the report for just about anything related to the job, including promotion and reassignment decisions.

Government Agencies

Government agencies can request your credit report for several reasons:

• To determine whether you're eligible for public assistance (to look for hidden income or assets).
• To help determine whether and how much you can pay in child support.
• To consider your financial status in determining eligibility for a government-issued license.
• To investigate international terrorism.
• Government agencies can also get identifying information about you, such as name, address, former addresses, places of employment, or former places of employment from credit reporting agencies, even if they don't have a purpose related to credit, eligibility for services, or child support.

Collection Agencies

Collectors look at your report to locate you or learn more about your assets.

Judgment Creditors

Judgment creditors trying to collect a debt based on a credit transaction involving a regular creditor can look at credit reports to decide whether to begin collection efforts against you. They can also use reports to locate you or your assets.

At least one court has said that individuals who don't regularly offer credit can't get credit reports to attempt to collect a judgment, but other courts disagree. So, in some districts, individuals may also be able to get a credit report to collect on a judgment (for example, a judgment for alimony or child support).

Entities With a Court Order

Even if a person, agency, or business does not have another permissible reason to get your report, if it can get a court order (not easy to do), it can get your report. For example, the IRS might get a summons that allows access to your credit report. Generally, you would have notice and a chance to oppose the request for a court order.

Who Can't Look at Your Credit Reports

Apart from those listed above, most other people and businesses can't legally request copies of your credit reports. For example, your credit report may not be used in divorce, child custody, immigration, and other legal proceedings. Nor can district attorneys look at your reports to investigate civil or criminal cases.

Also, just because the FCRA allows creditors, employers, landlords, and others to pull your credit reports doesn't give them, or anyone else, an open license to review your reports. In all instances, that entity must have a "permissible purpose." If it doesn't, that entity must have your permission before pulling a report.

What Are Permissible Purposes for Pulling a Credit Report?

As described in more detail above, the FCRA lists permissible purposes for pulling a credit report, which include the following:

• when you apply for credit or when a creditor is reviewing or taking collection action on your existing account
• when a potential creditor or insurer intends to extend you offers of credit or insurance (limited use)
• when you apply for insurance
• employment-related purposes (hiring and firing), only when you give that employer permission to do so
• when a court or federal grand jury orders it
• when you apply for certain government benefits or licenses that require a review of your financial background, and
• when you initiate a business transaction and a "legitimate business need" for your credit report relates to that deal. (15 U.S.C. § 1681b).

What Are Impermissible Purposes for Pulling a Credit Report?

If the person requesting your credit report doesn't have one of the "permissible purposes," then your credit reports are off-limits. Period. If your neighbor, ex-girlfriend, co-worker, relative, or complete stranger pulls your credit report, you can be relatively certain they've probably violated the FCRA.

It gets tricky, though, when a potential creditor, employer, landlord, or another person you have some colorable relationship with overreaches and grabs your report without a permissible purpose.

Here are some common scenarios when an individual or other entity pulls a report without an impermissible purpose:

• An employer pulls your credit report without asking your permission.
• Someone looking to sue you for a non-credit account or an involuntary debt—such as car towing and impound fees or breach of a real estate purchase agreement—pulls your report to find out if you have assets it can collect against.
• Your creditor pulls your credit report after you discharged that debt in bankruptcy.
• A tax collector, unless you already have a payment agreement or the information was subpoenaed. However, it's unclear if a tax collector can pull your credit report once it has obtained a tax lien.
• Someone requests your report to use it as evidence against you in a divorce, criminal, personal injury, or other non-credit lawsuit or proceeding.
• A landlord attempting to collect past-due rent unless the landlord has obtained a judgment against you.
• A credit card company pulls your report, but you were only an authorized user—not an obligor—on that account.

Detecting Unauthorized Users

It's not always easy to find out if someone who shouldn't have access to your credit reports has requested and received one anyway. One way to detect unauthorized users is to order your credit reports from AnnualCreditReport.com and look for unfamiliar names or businesses in the list of inquiries.

Talk to a Lawyer

If someone has requested your report illegally, you might be able to sue them for violating the FCRA. Your state's laws might offer additional relief and remedies. Talk to a lawyer for more information on filing a lawsuit.

You can also complain to state and federal government agencies.