free annual credit report

free annual credit report

The Importance of Obtaining a Free Annual Credit Report

1. The Significance of Monitoring Your Credit Regularly

Credit reports are documents that present your credit worthiness. It is used by credit granters to make critical decisions, like buying a home, buying a car, getting a credit card, or even getting a job. However, many people do not realize the significance of a credit report and credit score until one of these aforementioned events is imminent or has occurred. Monitoring your credit regularly will directly affect these events and future credit transactions. Various checks on your credit report are known as credit inquiries. Soft credit inquiries occur when you check your own credit report, when a business preapproves you for credit offers, or when a current creditor checks your account. Soft inquiries do not affect your credit score. Hard credit inquiries are initiated by you, with the intent of applying for credit; in most cases to buy a home, buy a car, or get a credit card. Potential employers and creditors can view hard inquiries, and these may affect your credit worthiness and credit score. Too many inquiries of either type can be detrimental to your credit score. A credit report is a detailed account of how you pay your monthly bills, how much debt you owe, and where you are financially. Credit reports are written up by creditors, who send the report to a credit bureau. The three major credit bureaus are Equifax, Experian, and TransUnion. Creditors can then access information from any of the three bureaus. Periodically there may be different information due to creditors not reporting to all three bureaus. The information on your credit report must be reported within the last seven to ten years, with the exception of a bankruptcy, which can be reported for the last 10 years! Credit reports are used mainly by credit granters, but can also be used by landlords, insurance companies, and employers. A credit score is a numerical value based on the level of risk involved in lending you money or offering you a line of credit. A good credit score is key to future credit transactions, with lower interest rates and better credit offers. A free annual credit report will help ensure and maintain a good credit score and credit offers in the future.

2. Understanding the Free Annual Credit Report

Here’s a snag you should also avoid. Some websites will coax a free report from the credit bureaus for you by luring you into signing up for credit monitoring. The costs of credit monitoring can run $50 to $130 per year. If you’re frugal, there’s no reason to pay for something you can do yourself (i.e., monitor your credit) for free. And if money’s not an issue, don’t assume credit monitoring is a foolproof shield. There are too many varieties of identity theft for any one product to catch.

Here’s what you won’t get if you request your report by calling the credit bureaus or going to their websites: peace of mind. At best, you’ll have to field spam and pop-ups, share personal and financial information that exceeds comfort levels, and unleash the up-sell. At worst, you’ll find websites that are phishing for your information. The reports may be free, but the risks aren’t worth it.

By now, I’m sure you’re convinced that reading your credit report is truly important. And you’re probably thinking it would be great to get it for free. If you’re entitled to a free report, and they’re available, then how come you’ve been buying them all these years? The answer, my friend, is that you haven’t been getting the reports, all three of them, from the three major credit bureaus. That’s the only place you’ll find a credit report that’s really free: AnnualCreditReport.com. The Federal Trade Commission has been charged by legislation to make sure everyone in the U.S. has the opportunity to get a free report from each bureau every 12 months. This is the only site at which you can fulfill that goal.

3. How to Access Your Free Annual Credit Report

The Fair and Accurate Credit Transactions Act of 2003, which was put in place by the Federal Trade Commission, has made it possible for credit consumers to obtain a free annual credit report from the three nationwide consumer reporting companies: Equifax, Experian, and TransUnion. So obtaining your free annual credit report has never been easier. This centralized location maximizes convenience for the consumer and helps to ensure consumer credit report access. Another benefit of the new law is that it also offers those individuals who become unemployed or are on welfare free supplementary credit reports. This takes effect as of June 1, 2005. Also, if you are denied credit, insurance, or employment, you are entitled to a free credit report within 60 days of being denied. This new law is designed to protect consumers from identity theft. Identity theft is the fastest growing crime in America to date. This law will not only provide free credit reports for identity theft victims but also give them the tools to prevent future occurrences.

4. Reviewing and Analyzing Your Credit Report

Reviewing and analyzing your credit report is an essential process in managing your personal finances and protecting yourself from discrepancies and fraud. Once you receive your report, it is imperative that you review it piece by piece. Credit reports are divided into 4 sections: identifying information, public records, credit information, and inquiries. Start by verifying all personal information in the identifying information. Make sure that your name, aliases, address, and the employer information is accurate. The presence of a social security number that is not yours or an address that you have never lived at could indicate a clerical error or worse, identity theft. If any such errors are present, further investigate them and inform the credit bureau. The public records section of your credit report contains information about your past financial obligations with the court. This information is very valuable to potential lenders and the absence of certain records could be just as harmful as the records themselves. Check for any civil judgments, bankruptcies, or tax liens and examine the dates and the amounts due. If this information is accurate and it is yours, don’t be discouraged since the impact of such records lessens over time provided that you are maintaining positive credit. If some of this information is not yours, you need to dispute it with the credit bureau and or the source of the public record. Be aware that the impact of a misreported public record can be drastically harmful to your credit.

5. Taking Action Based on Your Credit Report

One of the most critical pieces to obtaining your free credit report is the information that comes after. This can be a telling time of whether you are satisfied with the state of your financial affairs or you wish to work to improve your credit status. If you are pleased with your financial position, then great! Now it is important to protect your credit and continue to monitor it to ensure accurate reporting. Set a reminder on your calendar to contact the credit bureaus a year from now to obtain your next free credit report. If you find yourself disappointed with your credit report, remind yourself that it is not a permanent situation. With the proper steps and a bit of time, you can improve your credit rating for the future. The second most recent credit history represents about 25% of the credit score and it’s what lenders look at most. This means that it’s crucial to start with opening new credit accounts and paying the balance off right away. This will start to reflect a pattern of good credit and consist of 15% of your credit score. The most difficult part of improving your credit score is increasing the credit score on high-risk individuals who in many cases have no credit or a very poor credit history. The unfortunate reality is that those with a poor credit history will be subject to higher interest rates. Over time with general good credit habits, high-risk individuals can change the credit score level on the type of credit. The ultimate determinant of credit is based on a recent 2-year credit history. With time, a pattern of paying debts and bills on time will be established and will result in a better credit rating.