Impermissible Credit Report Use

The Fair Credit Reporting Act (FCRA) and some state credit reporting laws set forth the basic rules that protect your credit information. These laws allow only certain entities to gain access to your credit report in specific situations. They also restrict how your credit information can be used.

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. The FCRA and some state laws allow a fairly large class of people and businesses to pull your credit reports if you have a current or potential relationship with them. These include the following:

• landlords
• utility companies
• employers, and
• insurance companies.

Sometimes, though, individuals and businesses pull your report when they have no legal basis to do so, which is called having an "impermissible purpose."

When Pulling a Credit Report Is Allowed and Not Allowed

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 do so. In all instances, that entity must have what's called a "permissible purpose." If it doesn't, then that entity must have your permission before pulling a report.

What Are Permissible Purposes for Pulling a Credit Report?

The FCRA lists permissible purposes for pulling a credit report, which includes 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 there is a "legitimate business need" for your credit report that 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 report is off-limits. Period. If your neighbor, ex-girlfriend, co-worker, relative, or a complete stranger pulls your credit report, you can be pretty sure that they probably violated the FCRA. Where it gets tricky, though, is when a potential creditor, employer, landlord, or another person that you have some colorable relationship with overreaches and grabs your report without having a permissible purpose.

Here are some common scenarios when an individual or other entity pulls your 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 for an involuntary debt—such as car towing and impound fees or breach of a real estate purchase agreement—your credit 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 have a payment agreement already in place or the information was subpoenaed. It is unclear if a tax collector can pull your credit report once it has obtained a tax lien, however.
• 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—that account.

Remedies for FCRA Violations

If you believe that somebody wrongfully pulled your credit report, you might be able to sue them in state or federal court for damages. Your state's laws may also offer additional relief and remedies.