Does the Fair Credit Reporting Act Promote Accurate Credit Reporting?

Michael Staten, Fred Cate

BABC 04-14: The 1971 federal Fair Credit Reporting Act (FCRA) was intended to promote greater accuracy in credit reporting in the United States. Inaccurate credit reports can lead to overpricing on accepted loans, if not outright rejection. This paper examines how well the FCRA encourages accuracy within a voluntary and competitive reporting system. There is ample evidence that credit files in the U.S. do not provide an exhaustive listing of all past credit experience for many borrowers. However, relatively little data exists about how often specific items contained in credit reports are wrong. Despite missing data, U.S. credit files are among the most comprehensive produced by any reporting system globally and support remarkably precise risk assessment tools. The role that the FCRA assigns consumers to inspect their own credit reports appears to be the most underutilized of all the existing tools for promoting even greater accuracy…