Permissible Purpose is the title of section 604 of the Fair Credit Reporting Act, or FCRA. The FCRA is the Federal law that defines, among other things, when a credit report can be accessed by a third party. And while everyone knows that lenders can pull your credit reports, there are several other scenarios where a 3rd party can legally pull your credit reports. Some of the lesser known Permissible Purposes are…
1. Debt collection – Yes, collection agencies are allowed to pull your credit reports. They use the data to locate consumers (skip tracing) and determine your capacity to pay a collection. Their inquiries are “hard” and can lower your credit scores.
2. Employment screening – With your permission, and depending on what state you live in, employers are allowed to review your credit reports as part of their pre-employment and continued employment screening.
3. Insurance underwriting – Depending on what state you live in, insurance companies are allowed to review your credit reports before selling you an insurance policy. They’re using the data to determine the likelihood that you’ll file a claim or whether or not you’ll be a profitable customer.
4. Court order – This is most common in lawsuits where a consumer is alleging some sort of credit damage. Most of the time the consumer is more than willing to show you his or her credit report copies. However, if not made available the reports can be subpoenaed by the court.
Clearly the vast majority of credit reports are pulled by lenders and credit card issuers, which isn’t listed above because it’s obvious. It’s important, however, to recognize that your credit reports are used by a variety of other parties for a variety of other reasons. This is why it’s always important to maintain vigil over your credit reports. You never know who is looking at them!
Image by Andronicus Max