Free credit reports
By Don Kuehn
Who dreams up these names, anyway? Congress seems to have a thing for acronyms—but in this case, at least the result is good. The FACT Act (the Fair and Accurate Credit Transactions Act of 2003) guarantees everyone an annual copy of their credit report from each of the three credit reporting agencies: Equifax, Experian and TransUnion.
The FACT Act was rolled out across the nation in phases, concluding on Sept. 1, 2005, when residents of the Eastern states and all territories became eligible to participate. Now, no matter where you live, you can get a copy of your credit report for free once a year.
Your credit report includes your borrowing history, the types of credit you use, the length of time your accounts have been open and whether you’ve paid your bills on time. It tells lenders how much credit you’ve used, and whether or when you have sought new sources of credit.
Your report also shows public information such as bankruptcies, foreclosures, lawsuits, wage attachments, liens and judgments. Your FICO score (the measure of creditworthiness lenders use) is based on your credit report. So it's important to check your report for accuracy, especially if you expect to be in the market for big-ticket items (like a car or home mortgage) within six months. A low FICO score can cost you thousands of dollars in interest alone. For more on FICO scores, see below.
Each of the three credit reporting agencies collects information and reports it in slightly different forms, so the best thing to do under this new law is to check one company’s report this fall, another in January and the third one in May. That way, you can keep up with changes to your credit profile, see who has checked on your creditworthiness and be sure no one has stolen your identity, opened new lines of credit or abused your credit accounts.
Identity theft is a growing stain on the increasingly Web-based, automated world we live in. I dealt with this phenomenon from a first-person perspective last year after I apparently responded to an official looking e-mail and had more than $4,300 in charges rung up on my credit card (see "Phish Phood," October 2004).
So far, I have ordered credit reports from two of the three credit reporting agencies. I also took advantage of the opportunity to buy my FICO score from Equifax.
To get your first free report, go online at http://www.annualcreditreport.com/. You will be asked to identify your state of residence and to provide some personal information (Social Security number, date of birth, address, etc.). Then you’ll be given a choice of which agency’s report you want to receive.
Depending on how complex your credit history is, how many credit cards, mortgages or store revolving accounts you have applied for, and whether you have collections and public records on file, your report may be just a few pages long or read like a short novel.
It’s important to carefully check every entry on the report to be sure it’s accurate, and ask the bureau to remove any incorrect information. It must do so, by law, within 30 days. However, challenged information that has been verified as accurate will continue to be included in your report.
The reporting agencies must not include negative information that is more than seven years old, or bankruptcies that are more than 10 years old. Dispute resolution procedures are described in each report.
If you can’t go online to retrieve your credit report, you can call the agencies at the numbers below and request a hard copy by mail:
Equifax: 800/685-1111; http://www.equifax.com/
Experian: 888/397-3742; http://www.experian.com/
TransUnion: 800/888-4213; http://www.transunion.com/
According to the Equifax Web site, here are some tips to get you started:
Start small. Rebuilding your credit is like starting over from scratch, and starting small may be the easiest option. Credit cards from department stores or your local credit union can be useful.
Consider asking for help. If you can't qualify for credit on your own, ask a friend or family member to cosign for a small loan or credit card. If you can stay current on a major credit card account or small auto loan, this will speed up the process of re-establishing good credit.
Consider a secured credit card. They are guaranteed by a deposit you make with the credit grantor.
Keep your balances low. Avoid carrying a balance that is more than 30 percent of your credit limit. Lenders may view it as excessive debt that you may not be able to carry.
Reduce your household spending. Create a budget to track exactly where your money goes each month.
Call lenders if you can't pay some of your debts. Explain your situation and many of the lenders will be willing to work out a plan for you to pay back what you owe.
In the immortal words of Defense Secretary Donald Rumsfeld, "Stuff happens." Bad credit can happen to good people, but you can get your credit back in shape. You have to start working on it today.
It will take some time for your new spending and paying patterns to gain momentum. You have to show potential lenders that you don't depend on borrowed money for your financial survival. With patience and timely repayments, you should be able to build a new credit history that lenders will look upon favorably when making decisions about your ability to handle more credit.
But remember: You can never borrow your way out of debt.
Don Kuehn is a retired AFT senior national representative. This column is intended to increase knowledge and awareness of issues of importance to members and retirees. For specific advice relative to your personal situation, consult competent legal, tax or financial counsel. Comments and questions are welcome and can be sent to email@example.com.