Building Good Credit, Making Investments: Credit Reports

Federal law now entitles everyone to a free credit report once a year. The details, plus expert advice on how to make sure yours is accurate.

Who's Eligible for a Free Report?

Your ability to get a good deal on your credit card -- whether applying for a new one or negotiating better terms on an old one -- is based on the strength of your credit report. So it's vital that you know what's in it.

"Your credit report is your financial SAT," says Beth McConnell, director of the Pennsylvania Public Interest Research Group, a Philadelphia-based consumer advocate. Thanks to a new amendment to the Fair Credit Reporting Act, getting a copy of your report is now easier and cheaper. The law, which is being phased in by region, requires credit reporting agencies to give you a copy of your report, at no charge, once every 12 months.

Who's Eligible for a Free Report?

Consumers in western states -- Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming -- were able to order their free reports beginning December 1, 2004.

Those in the Midwest -- Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin -- got the right on March 1, 2005.

For southern consumers -- in Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, and Texas -- the magic date is June 1.

Those in the eastern states -- Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, Virginia, and West Virginia -- have to wait until September 1, as do consumers in the District of Columbia, Puerto Rico, and all U.S. territories. If your state is in the September group, there are special circumstances that entitle you to a free report right away: most commonly, if you are turned down for a mortgage, a credit card, insurance, or employment.

The three major credit reporting agencies, Equifax, TransUnion, and Experian, have set up a central Web site ( through which you can order your free annual report. It's important to note that these reports, mandated by law, are different from the "free" reports advertised by the credit reporting agencies and some other companies on TV and the Web. These are often given as part of a "trial subscription" to a credit-monitoring service that will then charge a monthly fee for allowing you to view your credit report as often as you wish, McConnell says.

    If You Find a Mistake...

    When credit reports contain inaccuracies, you've got to take action. Start by writing to the credit reporting agency, detailing what is wrong. Include copies of any supporting documents and request a correction or deletion. Within 30 days, the agency will investigate and report back to you. It also must forward all data you provide to the company that gave you the bad rep. If the company finds that you are right and it has made an error, it must notify all national reporting agencies. (You should contact all three yourself to be sure.) Any information that cannot be verified must also be deleted. Then you get a copy of your updated report.

    Tracy Shelton, a consumer attorney with the New York Public Interest Research Group based in New York City, suggests that, at the same time you contact the credit reporting agency, you also "reach out to the company that made the error." Don't wait for the reporting agency to do it for you.

    "That's an important piece -- working with the creditor," she says. That's because the company that gave you the black mark can wipe it away more quickly than you can working alone. It may take several more letters and more documentation to make your case. "It's a time-consuming process, and you just have to keep at it," Shelton says.

    If there's something in your report that's negative but true, you can demand that a letter explaining any special circumstances be appended to your report. That explanation must then go to everyone who asks for a copy. If you are in such a situation, be sure to send your explanation to all three credit reporting agencies because they don't always share this information among themselves.

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