About Free Credit Reports

Free credit reports are available to every consumer with a social security number, on an annual basis. Law requires each of the three main credit bureaus, Equifax, Experian and Transunion, to furnish each person his report once per 12-month period. You still have to pay a fee to see your credit score, but you can download your three free credit reports from any computer, free of charge.

History of

It used to be that consumers had to be denied credit to receive a free copy of their report, and then only from the bureau that furnished information leading to the denial of credit. Otherwise, people had to pay to see their own credit reports. Thanks to a federal law passed in December 2003, known as the Fair and Accurate Credit Transactions Act of 2003, that changed. Credit reporting agencies now furnish each consumer with a credit report free of charge once every 12 months, upon request of the consumer.

Benefits

Free credit reports allow consumers to check on their credit history, monitor their reports for errors and stay on top of their personal credit. Consumers can now look at their reports before applying for loans or interest reductions from lenders and have an idea of how their credit requests will fare. Credit reporting agencies benefit by the extra consumer traffic to their sites, and offer credit watch services and credit monitoring subscriptions to visitors downloading free reports.

Time Frame

Free credit reports are on a 12-month schedule. Consumers can download all three reports at one time, or stagger them throughout the year. You'll just have to wait 12 months from time of download to get another free report from the same agency.

Function

Credit reports allow potential lenders to screen borrowers based on their previous credit history, current debt load, payment history and age of credit accounts. Credit card issuers, debt collection agencies, banks and lenders report data on their customers to the credit agencies, and these pieces of information combine to form a person's personal credit report. Customers who have maintained good payment histories and shown proper management of their finances are considered a good risk by lenders, while a borrower with past judgments, bad loans and excessive debt is not.

Expert Insight

It's a good idea to check your credit report at least once a year to check for inaccuracies or potential credit theft and to review the overall picture. Be sure to check your report form all three agencies, as they may have slight differences. While most financial advisers recommend maintaining excellent credit and keeping credit cards open for the sake of your credit score, others such as Dave Ramsey advise paying off debt and closing credit cards without regard to your credit score.