Ethical Homes

Residents of the Eastern US can now finally check their credit reports for free.

When the Fair and Accurate Credit and Transactions (FACT) Act was passed in 2003, it required that credit reporting companies provide consumers with a free copy of their credit report up to once every twelve months. The credit reporting companies, however, claimed that for logistical reasons they couldn’t provide that capability to all people at once, and so they rolled it out to consumers in phases based on their state of residence, starting on the west coast in 2004. As of September 1st, the final region (consisting of the states north of South Carolina and east of Kentucky and Ohio, plus all US Territories) has been included in the program, and can now get copies of their credit reports for free from the three major credit bureaus. Details on the program are available on the FTC website, and the reports themselves can be obtained online at AnnualCreditReport.com.

Since the companies that report information to credit bureaus have a strong incentive to report negative information about consumers (to both punish them for misdeeds and to discourage other lenders from providing loans to those consumers, thus locking the consumers in to continuing to use them) and a low incentive to report positive information (since, again, doing so might encourage other lenders to attempt to lure those consumers away), and since bureaucratic and/or logistical errors can also cause incorrect information to slip into a person’s credit report, every consumer should be checking their credit report at least once a year to make sure that it is accurate and up-to-date. These reports are purely qualitative, describing the facts of a consumer’s credit history; consumers thinking about requesting credit in the form of a mortgage, auto loan, or new credit card may also want to purchase their credit score, which provides a quantitative view of that same history that consumers can use to determine what sorts of rates they might get on loans, and decide whether it would make more sense to get that loan now or spend some time improving their credit history before applying for the loan. Note that the FACT Act only requires credit bureaus to provide the qualitative reports for free; the credit score that summarizes those reports still costs money to be purchased, for around $15 per credit bureau from sites like MyFICO.com.

(Many people nowdays are concerned about identity theft, so many vendors are now also offering services that provide you with monthly updates of changes made to your credit report, usually for around $10-25/mo. Since you are actually allowed to make one request for a free credit report every twelve months from each of the three credit bureaus (for a total of 3 requests per year), however, and since there is no requirement that you make your requests of all three bureaus at the same time, it might make sense for those concerned about identity theft to purchase a full credit report w/ scores from all three bureaus at once, to establish a baseline and determine what (if any) differences there are between the information reported by each bureau. By requesting a free credit report from one of the three bureaus four months later, and then a report from the second bureau after another four months, and finally the report from the third bureau a full year after the initial credit score was obtained, and continuing to request reports from each bureau every year in the same pattern, you can then put yourself on a different cycle with each of the three bureaus, so that you are getting an update from one of them every 4 months, for free.)