The Federal Reserve Bank of San Francisco explains that credit bureaus compile reports on every person who uses credit credit cards, loans and other accounts. The bureaus make money selling this official information to lenders and other firms who make decisions on loans, insurance applications and employment. Federal law lets consumers see their own official credit reports, too.
Definition
A credit report is an official record of a consumer's financial activity, according to the Federal Reserve Bank of San Francisco. It contains demographic information and shows open and closed accounts dating back seven years, balances, available credit and payment history. Credit reports also show inquiries from lenders and certain legal actions foreclosures, liens, repossessions and bankruptcies. TransUnion, Equifax and Experian are the major credit bureaus, the Bankrate financial site explains. This trio compiles reports and provides them to lenders, employers, insurers, landlords and others who are allowed to review them.
Process
The Federal Trade Commission (FTC) explains that the Fair Credit Reporting Act (FCRA) provides free annual credit reports from all three bureaus annually to every consumer. They must be obtained through annualcreditreport.com, the official government-mandated website. The site allows online, postal and telephone orders, and it contains instructions for obtaining each type. A Social Security number and date of birth is required for the order, according to the FTC, and the credit bureaus may ask for additional identifying information to finalize the order.
Time Frame
The FCRA provides one free credit report from each of the three bureaus every 12 months, the FTC advises. Consumers can order them all at once or stagger them throughout the year. For example, those who want to monitor their credit regularly can order a report through annualcreditreport.com from a different bureau every four months.
Benefits
Regularly obtaining official credit reports through annualcreditreport.com has several benefits. Consumers see how lenders, employers and insurers see them based on their reports. The FTC explains that they might find negative errors, which they have a right to dispute and correct or remove. Some people may even discover signs of identity theft, like unrecognized accounts opened by fraudsters, the Privacy Rights Clearinghouse advises.
Warning
The FTC warns that commercial firms, and even the credit bureaus themselves, offer free credit reports that require some type of purchase or membership. For example, you might be required to purchase credit monitoring service to get the free reports or take a free trial membership that automatically imposes monthly charges if you do not cancel it. They are official reports, but they require a fee for something consumers can get for free through the FCRA-mandated site. Avoid paying by only ordering credit reports from annualcreditreport.com.
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