Is It Legal to Have a Credit Check Run If It Is Not Authorized?

by Ciele Edwards

If you think the only companies interested in your credit history are banks and credit card issuers, think again. More and more businesses are turning to consumer credit reports to lower financial risks and attract new customers. In addition to lenders, utility companies, cell phone providers, landlords and even some employers may review your credit history. Your credit report contains highly sensitive information that, in the wrong hands, puts you at risk of identity theft. To help protect your confidentiality, federal law requires that certain circumstances be met before a company can legally pull your credit records.

Permissible Purpose

According to the Fair Credit Reporting Act, no one has the right to pull your credit report without “permissible purpose.” A company with permissible purpose has a legitimate business need for the information. For example, if you apply for a mortgage loan, your lender must review your past credit history to determine whether or not you qualify for the loan and how much interest to charge you. If you didn't apply for a loan, the lender has no legitimate need for your credit records and can't legally conduct a credit check.

Authorization Required

Certain businesses cannot pull your credit reports without your authorization – even if they have permissible purpose to do so. Employers, for example, may incorporate a credit check into a background check when evaluating job applicants. A prospective employer must inform you, in writing, that it intends to run a background check and obtain your written permission to do so. You have the right to refuse the credit check, but doing so may result in the employer not offering you the position. In certain situations, however, the opposite is true. When you apply for a loan or credit card, for example, the lender can and will pull your credit report -- and it doesn't need your permission to do so. Creditors you currently have accounts with can also pull and review your credit records periodically without your permission.

Marketing and Privacy

The credit bureaus routinely sell credit information to third parties for marketing purposes. Third-party marketers don't have access to the finer details of your report, such as how much you owe and to whom. Marketers provide the credit bureaus with certain criteria, and the credit bureaus give the marketers the names and contact information of consumers who meet those criteria. Preapproved credit offers are just one example of third-party marketing at work. Although third-party marketers don't have direct access to your credit reports, they use your credit information without your consent. You have the right to contact each credit bureau and demand that it not sell your personal information to marketers. You can also visit optoutprescreen.com to “opt-out” of third-party marketing offers.

Legal Recourse

Your credit report contains a list of all of the lenders who have accessed your credit records within the last two years. You can pull one free credit report per year from each credit bureau. If, while examining your credit report, you discover that a company has pulled your credit history without permissible purpose or your authorization, the Fair Credit Reporting Act gives you the right to file a lawsuit against the offender for violating your consumer rights.

About the Author

Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.

Photo Credits

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