A new federal law, entitled the Fair and Accurate Credit Transactions Act, went into effect this week enabling millions of Americans to get a snapshot of their credit history for free. The FACT Act grants consumers one free credit report a year from each of the big three credit reporting bureaus -- Equifax, Experian and TransUnion. Currently, the cost of a credit report is around $9.
Why Should You Order a Credit Report?
Your credit report should not remain a mystery to you because it allows an institution or person, such as a potential lender, credit card company, landlord or employer to view your credit history and determine whether you would be a good risk for a loan, credit card, home or job. And, according to the Public Interest Research Group, one in four credit reports has errors that are serious enough to disqualify consumers from opening a bank account, purchasing a home or even getting a job! Furthermore, a negative credit score can impact the mortgage, auto and credit card rates available to you. Additionally, a credit report is an excellent tool to determine if any fraudulent transactions have occurred on your accounts.
How Can You Get a Copy of Your Credit Report?
The easiest way to access a free credit report is to log on to www.annualcreditreport.com. All of the background and vital information -- including when the free reports will be available in your state -- is available and easy to retrieve. You can also obtain a copy of your report by calling 877-322-8228. It is important to note that if you log on to one of the big three's Web sites to order a report, in most cases you will be charged. One of the bureaus, Experian, is already providing a free report to consumers independent of their geographic location. You can access this free report from Experian at www.freecreditreport.com.
If you live in the South or eastern United States, free reports will not be available until June or September of 2005. However, you should not wait until then to access a copy of your report. In fact, if you believe an error on your report was cause for your denial of a mortgage, employment, insurance or credit, you may be eligible for a free credit report immediately.
What Does Your Credit Report Contain?
Your credit report contains several types of information about you:
- Personal information: On a basic level, a credit report contains personal information, such as your name, current and previous addresses, employers, date of birth and social security number.
- Public records: All public records appear on the report for a period of time. For example, bankruptcies remain for 10 years, unpaid tax liens for up to 15 years and delinquent child support payments for up to seven years. In addition, inquiries, which occur every time a party requests a copy of your credit report, also show up on the report.
- Detailed credit history: A credit report also details your credit history, including the dates you opened any credit card accounts, as well as your credit limits, balances and monthly payment history. Negative information about your credit, including closed accounts, is removed seven years after the last activity, while positive information remains on your report indefinitely.
- Miscellaneous information: Credit transactions of $150,000 or more; a job with a salary over $75,000; an application for credit or life insurance valued at more than $150,000 and a statement of dispute which states if you are challenging a specific claim.
Are There Any Differences Between the Three Credit Bureaus?
All three major credit bureaus offer convenient and straightforward analyses. However, the big three might not provide you with the exact same information because creditors do not always report to all three bureaus -- meaning your credit score may vary. Therefore, it is a good idea to order your report from all three and compare the information.
How Can You Fix Mistakes on Your Credit Report?
If you uncover an error in your report, you should take the following steps, as applicable:
1. Send your report to the credit reporting bureau with a written explanation of the problem (be sure to keep copies of all your correspondence). They will investigate the discrepancy and notify the company that is the source of the problem if further investigation is needed. As soon as the issue is resolved, the credit reporting bureau will update your report and notify you of the changes.
2. Contact the creditor or lender immediately if you believe you are a victim of identity fraud. Most creditors have procedures for settling disputes, and the issue can be resolved quickly if there is accurate proof. Under the Fair Credit Reporting Act, the creditor is required to resolve the issue and update your records, usually within 30 days.
3. Contact the other major credit rating bureaus to universally address the issue. If there is a discrepancy on a report from one bureau, chances are this same error will also appear on your report with the other two major bureaus.
4. Check to make sure the error is fixed within 30 days of your inquiry. The bureau should provide you with a copy of your report free of charge, and they can also send the updated report to anyone who has obtained the inaccurate version within the last six months (or two years in the case of employers).
5. If you are unable to resolve a discrepancy, file a statement (less than 100 words) with the bureau at no extra cost, explaining the dispute. This statement will be included in your credit report for as long as the item in question remains on your report.
Mellody Hobson, president of Ariel Capital Management (arielmutualfunds.com) in Chicago, is "Good Morning America's" personal finance expert. Ariel associates Matthew Yale and Aimee Daley contributed to this report.