Are Free Credit Reports Safe?

Any credit bureau or financial company can advertise free credit reports, but the Federal Trade Commission (FTC) warns that such offers usually have strings attached. The Fair Credit Reporting Act (FCRA) provides an official, safe way to get no-cost credit reports, but it involves using a specific website. Otherwise consumers should be cautious about purchase requirements attached to free offers.

Definition

Credit reports are files containing financial information about consumers, the Federal Reserve Bank of San Francisco explains. The main compilers are three national credit bureaus called TransUnion, Equifax and Experian. The reports are sold to entities such as financial institutions, insurers and employers to help them evaluate applications. They show demographics, employment date, current and past credit accounts and certain public records such as court judgments on financial matters.

Purpose

Credit report entries often have mistakes. Dayana Yochim of the Motley Fool financial advice site warns that errors are found in more than 80 percent of credit files. The FCRA requires all three credit bureaus to give free report copies yearly upon consumer request. This allows people to check their files and complain to TransUnion, Experian and Equifax about inaccurate information. The data is corrected or removed if the dispute is correct.

Considerations

The FTC explains that the credit bureaus work through a special website, annualcreditreport.com, to provide the free FCRA-mandated credit reports. The website is safe, and it offers phone and mail order alternatives for people who prefer not to place online orders. Some credit bureaus and other commercial vendors advertise free reports, too, but the FTC warns that they usually require some type of purchase or sign-up for paid services like credit monitoring or identity theft protection. Such businesses are supposed to prominently disclose those terms on their websites.

Time Frame

Free credit reports are only available once each year from annualcreditreport.com, according to the FTC. Consumers can purchase additional reports from commercial sites as often as they wish. A "Wall Street Journal" article recommends spreading out no-cost reports to maximize the free entitlement. Order a report from one bureau at four month intervals, which covers the whole year. Repeat the same process every year.

Alternative

Fraud victims have an alternate way to get free credit reports, even if they ordered copies from annualcreditreport.com in the past 12 months. The FTC explains that they are entitled to review their files when they request fraud alerts from the credit bureaus. This lets them identify any unauthorized accounts or activity. Fraud alerts are free and last for 90 days, alerting lenders to take extra precautions before granting new credit.