Once you have done what you can to prevent the court from disclosing embarrassing details of a civil lawsuit, you must turn your attention to those most likely to distribute the information— reporting agencies. California has special rules designed to protect people by limiting what a credit reporting agency can report.
One such law is section 1785.11.2-1785.11.6 of the California Consumer Credit Reporting Agencies Act, also known as the “security freeze law.” This law allows California consumers to prevent a credit reporting agency from releasing the credit report or information in it without the consumers prior express authorization. California was the first state to enact such a law, but several other states soon followed suit.
To place a “security freeze” on your credit reports you must send a written request by certified mail to each of the credit reporting agencies. Each credit reporting agency will assign to you a unique personal identification number that you can use to temporarily lift the security freeze if you want a potential employer to conduct a background check or wish to open a new credit account. Otherwise, the freeze remains effective until you request that it be removed.
The security freeze must be provided for free if you are the victim of identity theft and submit a valid police report or DMV investigative report. In all other cases the credit reporting agencies charge a fee of $10 dollars for this service.
Most information can only be reported on your credit report for seven years, which is why it is so important to regularly check your credit report. If you discover something on your credit report that is incorrect or should not be reported, there are steps you can take to have the information corrected or removed.
The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies — Equifax, Experian, and Transunion — to provide you with a free copy of your credit report, at your request, once every 12 months. Under the FCRA, you are also entitled to a free credit report if a company takes adverse action against you such as denying your application for credit, insurance, or employment and you request your free report within 60 days of receiving notice of the action. In addition, you are also entitled to one free credit report a year if you are unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft.
Everyone has the right to dispute incorrect or prohibited information contained in his or her credit report. By reviewing your credit report and contacting the credit agency to report any mistakes, you start the process that requires the reporting agency to investigate the disputed information. Below are the steps you should take to ensure that your credit report contains only correct information and portrays your past in the most favorable light possible.
You should monitor your credit report for embarrassing or prejudicial information to ensure that an employer, landlord or lender will have a correct view of your history. If the review of your credit report reveals information that is incorrect or not permitted to be reported, you should send a dispute letter to all three credit reporting agencies immediately.
The dispute letter should be sent to all three of the major credit reporting agency because you cannot be sure which agency an employer or landlord will search. The dispute letter should include a brief but descriptive statement about the disputed information. Also include a copy of your credit report with the disputed entry circled and any other supporting documents. All correspondence with the credit agencies should be sent by certified mail to preserve a paper trail because dates and time taken to respond are important.
The purpose of the dispute letter is to start the investigation of the entry by the credit agency. After receiving the dispute letter, the credit reporting agency has 35 days to contact the landlord or other appropriate party about the dispute. If the landlord or other appropriate party does not respond or provide support for the accuracy of the entry within a reasonable time, which is usually 30 days, of receiving the request from the credit agency to justify the entry on the credit report, the credit agency must, by law, remove the entry.
The credit reporting agencies must, by law, respond to your dispute letter within a reasonable amount of time, usually 35 days (30 days plus five days for mailing). If no response is received, the item must be deleted from the credit report.
In addition to sending a dispute letter, you have the right to add a consumer statement to your report. The consumer statement can be up to 100 words and allows you a chance to explain the entry and provide any information you believe is important to anyone reviewing your credit report such as a future landlord or employer.
In addition to the limitation above, credit reporting agencies are prohibited from reporting eviction actions unless the landlord wins the lawsuit. A landlord “wins” in an eviction action if the tenant fails to respond to the complaint by not filing an answer; the court grants the landlord’s motion for summary judgment; the trial judge rules in favor of the landlord; or if the landlord and tenant settle out of court and agree as part of the settlement that the eviction action can be reported. In all other circumstances, the landlord does not prevail and the eviction action cannot be reported on a credit report.
If prohibited information is reported on your credit report and you are harmed by the inclusion of this information, California Civil Code Section 1786.50 permits you to sue for “any actual damages sustained by the consumer as a result of the failure or, except in the case of class actions, ten thousand dollars ($23,000), whichever sum is greater.” If you succeed, the court may also award you “the cost of the action together with reasonable attorney’s fees.”
This does not mean that the information cannot be obtained by searching the court records directly because the court records are open and accessible unless temporarily or permanently sealed. Part one of this article provides a description of the law relating to sealing your court record to prevent this information from being discovered by someone like an employer or landlord who searches your credit report.
As more employers and landlords conduct detailed background searches on applicants, it is important to keep past lawsuits from haunting your future. The best starting point is knowing the rules pertaining to the disclosure of court records and what is permitted by law to be reported by credit reporting agencies. See Part 1 in this series for information on sealing the details of your civil case or Part 2 for special rules for unique cases, such as unlawful detainers.
Melanie Bronny holds a juris doctor from the University of Utah's S.J. Quinney College of Law. Mathew Higbee Esq. contributed to this article.