Obtaining a Free Credit Report Consumers are conditioned to credit use. Sometimes credit is used without any real thought about the consequences of its use. Most people finance their homes with mortgages and pay for their cars with loans. Loans are also used to help pay for college expenses. Still, lots of people make purchases with credit cards.
As credit is used, a credit history is being established. Credit just does not happen. There is a process to establishing credit. For example, a credit application is filed or some other screening process is used to determine if an individual is worthy of receiving credit. In other words, is this individual a good credit risk? Creditors use a credit report to help them determine if an individual is a good credit risk. Therefore, it's important for you to know what is in your credit report.
A credit report is a history of how an individual pay bills and other debts and is used by banks, insurers, landlords, and potential employers to make judgments about your reliability. Under the new Fair and Accurate Credit Transactions Act (FACTA) you can obtain a free copy of your credit report if you suspect you have been a victim of fraud, receive welfare assistance or are unemployed, or if you have recently been denied a loan or other benefits based on negative information in your report. In some states such as Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey, and Vermont, consumers have free access to their credit reports. In other states the credit bureaus were permitted to charge up to $9 for a credit report. However, FACTA is bringing about additional changes to this procedure.
In 2005, all consumers will have a right to obtain one free copy of your credit report from each of the three major credit bureaus every 12 months. Consumers have the option of obtaining their credit report from each of the three national credit reporting companies at the same time, or you can order from only one or two. The Federal Trade Commission (FTC) will approve free credit reports in Alabama beginning June 1, 2005. That's right! Alabama consumers will be eligible to receive free credit reports at that time.
It is recommended that you check your credit report at least once a year from each of the three major credit bureaus: Equifax (800-685-1111, www.equifax.com), Experian (888-397-3742, www.experian.com), and TransUnion (800-916-8800, www.transunion.com). However, the three national consumer reporting companies have set up one central website, toll-free number, and mailing address to obtain your free annual report. To order, click on www.annualcreditreport.com, call 877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. If you have Internet access you can also go online to print the form at www.ftc.gov/credit. As a precaution, do not contact the three nationwide consumer-reporting companies individually. They only provide free annual credit reports through www.annualcreditreport.com, 877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, Georgia 30348-5281.
Determining Your Credit Score When you obtain your credit report, you will be able to determine your credit score. Every individual with a credit record has a credit score. A credit score is a number calculated by a credit bureau, a lender or another company based on your credit report. The credit score is used to help lenders and others that use credit reports to be able to make a quicker and more useful decision as possible. Your credit score can be very helpful in obtaining a loan with a lower interest rate. It can also help you to obtain an insurance policy at a lower cost.
Now due to FACTA, beginning December 1, 2004, you will have a right to obtain your score from a credit bureau as well as an explanation of the key factors used in computing that score. The credit bureau may charge you a reasonable fee that is determined by the FTC. Mortgage lenders use a credit score in conjunction with your application for a certain type of home loan. You will now be able to get your score and get more information about your score for free.
To get more information about your credit score under FACTA, the loan application must relate to a home loan and it must be for purposes such as a loan to purchase or refinance a one-to-four-family home or for a home equity loan or line of credit for consumer purposes. A home equity loan to finance a small business will not qualify.
In closing, to obtain additional information about credit reports, credit scores, and FACTA, go to the FTC website at www.ftc.gov or call toll free at 877-382-4357.
References FDIC Consumer News. (Fall 2004). Coming soon: Free credit reports and access to credit scores. Washington, DC: Federal Deposit Insurance Corporation, p. 5.
Richard, Paul. (2004). ICFE eNEWS: How to get your free credit report. Retrieved December 16, 2004, from Institute of Consumer Financial Education. Federal Reserve Bank of San Francisco. (2004). Your credit report: What it says about you. Retrieved January 7, 2005.