What is Permissible Purpose?

The Fair Credit Reporting Act (FCRA) prohibits a credit bureau from furnishing an individual's credit report unless there is a permissible purpose for doing so. Permissible purposes include using a credit report for a credit or insurance transaction, for employment purposes, or account review. Otherwise, if a consumer directly requests to view their report or gives consent this is permissible as well.

Permissible purpose is always required in order to pull a consumer’s credit report. Permissible purpose prevents companies from taking advantage of consumer reports and potentially dinging their scores from multiple inquiries. It’s a safeguard in order to effectively help those that could be potentially wronged by companies looking to acquire their credit data without due cause.

What Kind of Applications Constitute Permissible Purpose?

Permissible purpose can be constituted by many different things including but not limited to: credit card applications, all types of loan applications, applications for lines of credit, insurance transactions, employment applications, lease applicants for rental units, or even account review for already active lines of credit, etc.

Why is Permissible Purpose Required?

Permissible purpose is required in order to help prevent abuse of credit data. If credit reports could be pulled with relative ease and for any reason, this could potentially cause a lot of damage to consumers and their future ability to borrow. So, permissible purpose is a protection for consumers in order to prevent their data from being misused and their credit from being overanalyzed and potentially damaged.

Penalties of Permissible Purpose

For companies or individuals that violate permissible purpose there are potentially statutory violations of up to $1000 per offense. If someone knowingly did this, the fines could be quite heavy since there would also be significant legal fees associated with this as well.

Permissible purpose is just one of the protections in place to protect consumers from bad actors. Under the Fair Credit Reporting Act, there are many ins and outs that are prohibited and ideally promote free and fair access to capital for all consumers.