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Credit reports and investigative consumer reports both contain information on individual consumers. But they differ in terms of content, comprehensiveness, and who is likely to request and read them. Credit reports are far more familiar to most people, but investigative consumer reports can also play an important role in their lives. Here is what you need to know about both types of reports.
Credit reports are regularly updated files compiled on individuals by credit bureaus, based on information supplied to them by those individuals' creditors, such as mortgage companies, auto lenders, and credit card issuers. The three major national credit bureaus are Equifax, Experian, and TransUnion.
Credit bureaus sell their reports to lenders and other businesses that want to know how a particular individual has handled credit in the past. The different bureaus' reports can differ to some extent, because some creditors report to one or two bureaus but not all three. (And some creditors report to none at all.)
But all credit reports typically contain information on how much money the person owes, how much credit they have available to them, whether they are making their payments on time, and whether they have ever gotten into credit trouble, such as defaulting on a debt or declaring bankruptcy.
All of this information, in turn, is used to compute credit scores for that person, based on formulas developed by FICO or one of its competitors, such as VantageScore.
Credit reports do not include certain other information, such as the person's income, bank balances, employment history, medical history, criminal records, or marital status.
Credit reports are regulated by the federal government under the Fair Credit Reporting Act (FCRA). The law limits what can be in a credit report as well as who can request one. Generally speaking, lenders, insurance companies, government authorities, landlords, and employers are allowed to access someone's credit report if they have a legally legitimate reason for requesting it.
Individuals also have a legal right to see their own credit reports. They can obtain a free copy from each of the three major bureaus at least once a year at the official website for that purpose, AnnualCreditReport.com. They also have a right to dispute any information they believe to be incorrect, and the credit bureau is required to investigate.
In addition, individuals have the right to restrict access to their credit reports, free of charge, through a credit freeze.
Investigative consumer reports are less common than credit reports but broader in their content. While virtually every American adult may have a credit report, far fewer will ever be the subject of an investigative consumer report.
Like credit reports, investigative consumer reports are regulated under the Fair Credit Reporting Act. The law defines one as "a consumer report or portion thereof in which information on a consumer's character, general reputation, personal characteristics, or mode of living is obtained through personal interviews with neighbors, friends, or associates of the consumer reported on or with others with whom he is acquainted or who may have knowledge concerning any such items of information."
The law adds that the information in an investigative consumer report cannot include "specific factual information on a consumer's credit record obtained directly from a creditor of the consumer or from a consumer reporting agency when such information was obtained directly from a creditor of the consumer or from the consumer." In other words, the compilers of investigative consumer reports can't simply incorporate someone's credit report into it.
Two common uses of investigative consumer reports are tenant screening and employment screening. An employer, for example, might request one to check on the background of a job applicant (or, in some cases, a current employee). The employer must inform the person that they plan to request a report on them and obtain their written permission for doing so. If an applicant is rejected based on the report, or a current employee fired or otherwise adversely affected, the employer must explain the reason and allow them to review the report for accuracy.
Once the investigative consumer report has served its purpose, the law requires that it be destroyed. According to the Federal Trade Commission, "that can include burning, pulverizing, or shredding paper documents and disposing of electronic information so that it can't be read or reconstructed."
The companies that create investigative consumer reports aren't the same as the credit bureaus that compile credit reports, and they far more numerous (although Experian and TransUnion have divisions for that purpose). Many will provide free copies of their reports to individuals once every 12 months, if they happen to have one on them.
The Fair Credit Reporting Act (FCRA) is a federal law, first passed in 1970 and amended a number of times in the years since. A 2018 version says its purpose is "to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information. "
The information on your credit report is gradually displaced by newer information. Most of it will fall off your report completely after seven years, although Chapter 7 bankruptcies can remain for 10 years.
The Fair Credit Reporting Act is enforced by the Federal Trade Commission, although some rulemaking authority now resides in the Consumer Financial Protection Bureau.
Credit reports and investigative consumer reports are both subject to the rules of the Far Credit Reporting Act. Under the law, individuals who have been the subject of such reports have a right to see them and to challenge any information they believe to be inaccurate.