Credit reports aren't just for creditors

We are all aware that lenders routinely consider our credit report when we apply for credit.  We would only expect them to.  But do you realize that your credit report can be seen by others without you even being aware of it?  According to the Fair Credit Reporting Act (FCRA), anyone with a "legitimate business need" can see your credit report. 

Who looks at credit reports

Lenders need to know the financial risk in granting credit; that is obvious.  Whenever you apply for a mortgage, auto loan, personal line of credit, or credit card, your credit report and credit score are considered.  The health of your credit history will determine whether you are granted credit, as well as the terms and conditions of the loan.  Pre-approved credit cards and loans aren't really completely approved and guaranteed when they send out your credit offer.  Creditors who send out pre-screened offers for credit usually buy names of consumers who meet certain criteria from the credit reporting agencies.  Once you respond to their credit offer, the creditor will check your credit report for any negative changes before they finalize your approval, and may possibly deny credit or change the conditions of the loan or credit card that were initially pitched to you.  Lenders, financial institutions, and credit card issuers that you already have an account with may access your credit report to give you better terms if your credit history has improved since your application, or to raise your credit card's interest rates if your credit has suffered since opening the account.

Landlords often check your credit report and use the information to determine whether you've had evictions in the past, or if you have too much debt to be able to afford the rent.  Commonly, landlords may not allow you to rent a place that costs more than 30% of your monthly income, and if you have a lot of debt, it can reduce the rent amount they'll approve you for.  If you have poor credit or limited income, they may increase the deposit required or demand a payment of first and last month's rent in addition to your security deposit.  Laws vary state to state concerning maximum deposits allowed, so check to see what applies where you live.  Also, practices and requirements often vary widely between corporate rental management and privately owned rentals; privately owned rentals may be more forgiving and understanding of personal circumstances, and so may be the better choice for someone who has credit and income issues. 

Insurance Companies may check your credit report before you are issued an auto or homeowner's policy.  Insurance companies believe that a person who demonstrates financial responsibility has a lower chance of filing a claim than a person who shows a history of financial instability.  This results in higher premiums for those with a not-so-great credit history.  Insurance companies give us a score based on our credit history using similar information as our credit score, such as repayment history and debt levels, but a credit score and an insurance score are not the same.  The method for computing your insurance score will also vary state to state and between different insurance companies, as some companies weigh certain factors more heavily than others and some states restrict the use of credit information for insurance purposes.  If you suffer any negative consequences due to your credit, such as denial or termination of insurance coverage, or increase in premium, the insurance company is required by the FCRA to tell you why and provide contact information of the credit reporting agency that provided the credit report, so that you have a chance to dispute the negative items.

Employers or potential employers may check your credit report, but they'll need written consent from you first.  Most employers who request your credit report do so only to check your credit report for identifying information, such as name, SSN, address, and previous employers to ensure that you are who you say you are.  The majority of employers are more interested in doing a criminal background check.  The employers that check your credit report to actually obtain credit data about you usually have a reason concerning security.  Financial institutions, brokerage institutions, jewelers, and anyone else who is considering hiring you for a position where you could have access to cash or valuables may want to see your credit report.  Also, government agencies can consider your credit report and may deny employment if the position you are applying for requires a security clearance.  The unfortunate reality is that someone who simply mishandled their finances may be denied a position due to the employer's fear of theft, or fear that a person with troubled finances may be more easily bribed for sensitive information.  The FCRA requires that anyone who is fired, or denied employment or promotion due to their credit is to be told why, and provided the contact information for the reporting credit agency so they have the opportunity to dispute negative information.  The real truth is that the employer may just come up with an easier excuse not to hire.

Government entities may access your credit report for various reasons.  Federal, state, and local authorities may obtain basic identifying information, such as name, current and former address, and current and former employers on any consumer for any reason.  Your credit history may be checked if you are applying for a professional license or government benefit where your financial status is a factor in your approval.  State or local child support enforcement agencies may access your credit report to establish or modify your support obligations.  Law enforcement agencies with authority to investigate terrorism and counterintelligence, such as the FBI, have access to a person's credit report, as long as they can certify that such information is needed for investigation.  The credit reporting agencies are not allowed to disclose that some one's credit report was accessed by these law enforcement agencies, so that a person would not be able to find out if they were being monitored by the FBI.  Also, a person's credit report may be court ordered, including grand jury subpoenas.

Not as private as we hoped

For a long time I thought that my credit report could only be seen by those with whom I've applied for credit.  It's turning out that our credit history is a factor in things that have nothing to do with getting a loan or credit card.  It seems that the more often our credit report is accessible by more people, the smaller of a chance we have at keeping our credit record private.  The best we can do is to safeguard our private information as well as we can, only give out our SSN when absolutely necessary, monitor our credit report for inaccuracies and fraudulent activity at least annually, and be on the lookout for evidence that our private information is being mishandled.  Criminal penalties can be brought against those who knowingly and willingly obtain a consumer credit report under false pretenses.  Contact the Federal Trade Commission at www.ftc.gov if you have suspicions of identity theft or fraudulent credit report access.

Sources:
epic.org
privacyrights.org
insurance.wa.gov
moneycentral.msn.com
ftc.gov