Accessing a debtor's credit report illegally can cost you damages, $1,000 in fines and legal fees if the debtor sues you. Federal law says you can only look at a report if you have a valid legal purpose or the debtor gives you permission. In most cases, being a creditor gives you legal grounds to contact a credit bureau. But in some situations, as when a debtor files for bankruptcy, asking for the report may not be an option.
If a potential debtor applies to you for, say, a car loan or a mortgage, you have every right to review her credit. You can also request a report if you're reviewing an existing account and deciding whether you need to sue or foreclose to get your money. If you've won a court judgment on a debt, you can ask for a credit report to find where the debtor's assets are kept. If none of these apply but you win a court order to review the credit report, that's legally valid too.
How to Apply
If you're pulling the report for a legally approved purpose, you don't need the debtor's permission. You will have to register with the credit bureau you want to use -- for example through Experian's Connect Program. When you want to pull someone's report, you file a request with the bureau, providing any information and fees the bureau requests. If you're reviewing a request for new credit -- an added loan, a mortgage refinance -- and you reject it based on the report, you have to tell the debtor the reason.
Beware of Bankruptcy
If a debtor files for bankruptcy, you can't try to collect money from him outside the bankruptcy court. This makes it risky to pull a credit report after he files. If the debtor sues you and convinces a court you were plotting to collect from him, you may be liable for damages. Even if the debtor doesn't win his case, your legal fees may be substantial. Courts have widely differing rulings on when it's acceptable to pull a report during bankruptcy.
In some cases, you can't legally obtain a report at all. For instance, if you're a landlord trying to collect past-due rent, you can't pull the report without a court judgment for the debt. If your debtor has already finished bankruptcy and wiped out what she owes you, you can't ask for her report. Some states have tougher laws on credit reports than the federal government does. Vermont, for example, requires you to get written permission before you obtain a report, even with a permissible reason. Look up your state's laws before you act.