If your original creditor is unable to recover money you owe, it may sell the debt to a third-party collection agency. The buyer is now the legal owner of the account and can go after you for the payment. Although the Fair Credit Reporting Act protects your privacy, it also gives debt collectors the right to inquire about your credit. You can only force the credit bureau to remove the inquiry if the debt was reported in error.
Accessing Your Credit Report
Under the Fair Credit Reporting Act, a business does not need permission to access your credit report if it has a valid permissible purpose. The FCRA's list of permissible reasons for a third party to gain access to your account includes taking collection action on your account. Debt collectors generally pull your credit report to learn about your assets; this qualifies as a permissible purpose because the information can be used to help collectors settle the debt.
The Impact of an Inquiry
A credit inquiry has a minimal impact on your credit score. According to the MyFICO website, a single inquiry lowers a score by five points or less. For some people, an inquiry will have no effect at all, but multiple inquiries will lower your score. Credit inquiries typically raise red flags because they usually signify an attempt to obtain credit. The inquiry lingers on your report for at least two years.
Errors and Inaccuracies
The FCRA also protects you from the misreporting of information on your credit report. If a debt collector or credit bureau reports incorrect or inaccurate account information, it is violating the FCRA. Examples of violations include failing to report that a debt was discharged in bankruptcy and reaging old debt to extend the statute of limitations. Credit bureaus can sometimes mix up similar credit files and misreport information. You have the right to dispute any information you feel is not reported accurately. Begin the dispute process if you already settled the debt with the original creditor or believe a reporting error has occurred.
Disputing the Debt
Contact the credit bureau to initiate the dispute process. Once you open the dispute, the credit bureau will launch an investigation to determine if the account is valid or not. If you do not owe the debt or the debt collector does not respond within 30 days, the inquiry and any related negative reports are deleted from your credit report. After the investigation is complete, the credit bureau sends you the results along with your updated credit report.
- Nolo: Most Common Violations of the FCRA
- Nolo: Who Can Look at Your Credit Report?
- MyFICO: What Are Inquiries and How Do They Affect My FICO Score?
- Experian: Frequently Asked Questions
- Federal Trade Commission. "A Summary of Your Rights Under the Fair Credit Reporting Act." Page 2. Accessed Feb. 8, 2020.
- Consumer Financial Protection Bureau. "How Do I Dispute an Error On My Credit Report?" Accessed Feb. 8, 2020.
- Consumer Financial Protection Bureau. "Dispute Information Provided For Your Credit Report." Accessed Feb. 8, 2020.
- Consumer Financial Protection Bureau. "What Is a Statute of Limitations On a Debt?" Accessed Feb. 8, 2020.
Jeannine Mancini, a Florida native, has been writing business and personal finance articles since 2003. Her articles have been published in the Florida Today and Orlando Sentinel. She earned a Bachelor of Science in Interdisciplinary Studies from the University of Central Florida.