Free Credit Reports

If you're thinking about applying for a new credit card, or even buying a new home, you might want to take a look at your credit report before filling out an application to make sure they're aren't any errors on your report. The good news is that it won't cost you a penny to get a copy because you're entitled to a free credit report once every 12 months.

Credit Reporting

In this publication we're going to briefly discuss why you're entitled to get a free copy of your credit report. Then we'll let you know where you can go to obtain a free copy. Finally, we're going to follow up with a discussion of the offers of free credit scores - which are not the same as a credit report.

On September 1, 2005, we reached a milestone with respect to the Fair Credit Reporting Act - namely Americans in all states are now eligible for free annual credit reports. To understand what's happened over the last year or so and what these free credit reports mean to you, we need to quickly revisit a Federal Trade Commission ruling from the summer of 2005.

FTC Ruling on Free Credit Reports

Back on June 4, 2004, the FTC made its final ruling on the rollout schedule and requirements to deliver free annual credit reports to consumers. To make things easier on the three national credit reporting agencies - Experian, Equifax and Trans Union - the FTC agreed to a west coast to east cost rollout schedule over a nine month period of time.

Additional Resources

Starting on December 1, 2004, Western states (Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming) were eligible for free reports.
Midwestern states (Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin) were eligible starting on March 1, 2005.
Southern states (Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, and Texas) became eligible on June 1, 2005.
The remaining Eastern states (Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia, the District of Columbia and Puerto Rico), along with all US territories became eligible starting on September 1, 2005.

Since the September date has now passed, this means the rollout has been completed and all US residents are now able to receive a free credit report annually.

Credit Report Rollout Schedule

It's important to understand why the FTC agreed to a rollout schedule. The credit reporting agencies claimed that they needed time to establish a centralized service to provide these credit reports and they thought that a roll out schedule would enable them to meet the volume of requests in a more timely fashion.

In fact, the final ruling from the FTC still provides some relief during times of heavy volume, allowing the placement of credit report requests to be placed in a queue for processing in a "reasonable time."

AnnualCreditReport.com Website

The FTC ruling called for all three credit reporting agencies to create a centralized service for consumers to request annual credit reports. The website - AnnualCreditReport.com - is the only online service authorized by these three credit reporting agencies for this purpose. The site provides for both security and private of information flow.

The services of that website allow you to request one free credit report every 12 months from each of the three reporting agencies. You don't need to order all three reports at the same time and the 12 month waiting period applies to each company individually. You can also request a free credit report over the phone by calling a toll free telephone number: 1-877-322-8228.

Credit Reports and Credit Scores

While consumers are entitled to annual credit report at no charge, this does not entitle you to a free credit score. The difference is subtle but worth mentioning. A credit report is a file that outlines your payment patterns as reported by the credit reporting agencies network of participating companies. In other words, the credit file contains a listing of items such as late payments, partial payments and outstanding credit balances.

The accuracy of your credit report is important because it's used as the basis for developing a credit score. By allowing consumers to get a free copy of their credit history or payment history, they can check it for errors and take action to correct those errors before applying for credit.

Free Credit Scores

A credit score is a complex mathematical formula that takes into consideration all of the items appearing on your credit report and creates a "score" that quantifies your credit risk. The most common credit scores is called a FICO score. You're not entitled to a free credit score, only a credit report. You can however purchase your score for around $15 - $20 if you'd like at the centralized website.

Many companies use the credit score to determine whether or not to extend you credit. This can be as simple as determining if an electric company will require a deposit on a new account or as complex as a mortgage.

Be careful to read the fine print if you happen to see an offer of a free credit score. Most times this offer is really just a free trial offer to a credit score tracking service with a monthly fee of around $10 automatically starting up after the free trial is over.

Value of Credit Reports

While the credit score might seem like the most important piece of credit information, keep in mind that the score is based on the information found in the credit file. That is actually the real value of the credit report - to verify that the information appearing in the report - your credit history - is accurate. In fact, the only legal solution that companies providing credit repair services can offer consumers is help in correcting the information appearing in credit reports.

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