How to Get Your Free Annual Credit Reports
If you could get a detailed dossier of your physical health -- outlining the positives and negatives in an easy-to-understand form -- you'd jump at the chance, right?
Then consider how easy it is to check on a major part of your financial health with a free credit report. It is the most effective way to learn what banks, insurance companies and even future employers will see about your bill-paying past.
Here is a look at how to get free annual reports from the three major credit reporting agencies, why they matter and how regular check-ins can help you stay fiscally fit.
What Is a Free Annual Credit Report?
Thanks to the federal Fair Credit Reporting Act, the three major credit reporting companies are required to supply a free copy of your credit report once every 12 months, if you request it. The companies -- TransUnion, Experian and Equifax -- compile information on your bill-paying history, public records related to debt (such as bankruptcy) and inquiries about your credit.
[Read: Best Starter Credit Cards.]
The reports are the basis for your credit score and are sold to companies to help them make decisions about your ability to handle major responsibilities such as a mortgage, insurance or even whether you're fit to be hired for a position.
"The importance of checking your credit report can't be understated," says John Ulzheimer, a credit expert who formerly worked with credit bureau Equifax and credit analytics company FICO.
Reports also can identify whether you are, or could be, a victim of identity theft.
Gerri Detweiler, education director for Nav, which helps business owners manage credit, says, "In this day and age, with so many reports of data breaches and identity thefts, if you aren't checking your credit, you're neglecting one of the key parts of your financial profile. You're almost opening yourself up for potential problems if you don't check, such as identity theft or mistakes that can end up being very expensive."
How Can You Request a Credit Report?
There are three ways to obtain your free report from the three major credit reporting companies.
Website. Visit AnnualCreditReport.com, and follow the instructions. Once you fill out the necessary personal information, including your Social Security number and date of birth, you can select whether you want one, two or all three of the credit companies' reports right away. After answering some questions about your past addresses and accounts, you'll have a chance to download the report and view it on your screen.
The best option is to print it right away. It could be two dozen pages or more, depending on how much credit history you have, such as current or recent credit cards and mortgages.
Toll-free number. If you call 877-322-8228, the report can be mailed to you.
Mailing address. To conduct the process almost entirely by mail, download the annual credit report request form, fill it out and mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
What Does a Credit Report Look Like?
A credit report clearly spells out the positive and negative aspects of your credit history.
"Reports have been constructed in such a way they're pretty easy to read and understand," Ulzheimer says.
At the top of the report, you'll see personal information , such as your name, addresses from the last couple of decades or more, telephone numbers, and current and former employers. That's followed by public records, such as a bankruptcy.
Next, you'll see information about problem accounts, such as ones where you missed a payment or those that went to collections. These often stay on your credit file for up to seven years from the date of the delinquency.
The listing of satisfactory accounts follows -- these are reported to be in good standing.
In the inquiry section, you'll see different types of requests for your credit information.
The promotional requests are from companies that get limited information about your credit so they can make an offer for a credit card, loan or insurance policy. If you don't want to receive these preapproved credit card offers, you can opt out for five years or forever through OptOutPrescreen.com.
You might have other credit inquiries that were generated when you shopped around for a mortgage or car loan, for example. Fortunately, those types of credit inquiries aren't as detrimental to your overall report as they used to be, says Ed Mierzwinski, senior director of the federal consumer program at U.S. PIRG, a consumer advocacy organization.
Why Should You Review Your Credit Reports?
Maybe you've taken a quick look at the report and are ready to toss it into a file. Resist the temptation. Experts recommend you set aside an adequate amount of time -- maybe an hour -- to review it.
Detweiler recommends three stages of review for each report. "First, read through and flag questions you have," she says. "You almost certainly will have questions. See if you can find an answer on a reputable website or contact the credit bureau." Then, she suggests you identify anything you think is wrong. You can dispute the issue online or by mail. Finally, "really look at it from a lender's perspective," she says.
[Read: Best Credit Cards for Excellent Credit.]
Detweiler has encountered mistakes in her own past reports, including multiple late payments incorrectly reported by a mortgage lender. She had to contact the lender to get it fixed.
"Consumers think if they pay their bills on time, they don't need to worry about it," she says. "But mistakes can happen. You can get mixed up with someone else, or a credit report can indicate that you're a target for fraud."
What to Do if You Find Fraud in Your Credit Report
Some credit report mistakes are more innocent than others. Slight variations on your name and a listing of an address where you never lived could be a sign you're being targeted for fraud, Ulzheimer says. Also, "if you find accounts in default that don't belong to you, that could be indicative of fraud," he says.
The first step to correcting these potentially costly errors is to contact the credit bureaus and the creditors or service provider to check on -- and potentially challenge -- the information. If the problem is an unpaid debt in an account that was taken out fraudulently in your name, you might have to file a police report and affidavit, Ulzheimer says. This helps separate you from others who tell credit bureaus and creditors the same story, but who are actually trying to get out of paying their bills.
How Often Should You Check Credit Reports?
Just as you see a doctor for a general checkup once a year, you should check credit reports "at the very least once a year," Ulzheimer says. "I think you should do it once a month because credit reports go through an entire cycle of changes every 30 days."
If you haven't pulled a free credit report in a while -- or ever -- then you might want to consider pulling all three at once to get a baseline idea of how each of the credit reporting companies rates your credit. The downside is that you wouldn't be able to get another free report for a year from any of the websites.
Another idea is to stagger the reports, maybe pull one from Experian right away and follow up every four months with another entity. There are also websites that offer opportunities to get more frequent free reports, and Equifax also has made monthly free reports available through its new consumer program Core Credit.
In addition, several states allow their residents to pull additional free reports per year, and fraud victims and others can also get extra copies. Experts insist that you shouldn't need to pay for information about your credit history.
"If you're pulling out a credit card in order to buy a credit report, then you haven't looked hard enough for all the free options," Ulzheimer says.
But don't get carried away by your monitoring, he cautions. Monitoring any more than 30 days at a time "is like watching grass grow," Ulzheimer says. "There are minor changes here and there, but daily it will look almost exactly as the day prior."
Mierzwinski says that another option to consider is a credit freeze. A freeze would allow you to restrict access to your credit report. Thanks to a federal law, the three major credit reporting agencies allow you to freeze your credit for free. This law preempts states from passing stronger credit freeze laws on their own, though, he says.
You can contact the credit reporting bureaus to request fraud alerts or credit freezes, which are also known as security freezes, or to opt out of prescreened credit offers:
800-685-1111
888-EXPERIAN (888-397-3742)
888-909-8872
How Can You Get a Free Credit Score?
Credit scores are not included in free annual credit reports. But several dozen credit card companies and other sources will give you a credit score and a summary of your credit history at no cost, Ulzheimer says.
"Monitoring the score is important, but not in lieu of monitoring credit reports," he says. "The credit score will not tell you if something fraudulent has hit your credit report."
That's why reviewing your report and fixing any issues related to your payment history is the primary goal.
[Read: Best No-Annual-Fee Credit Cards.]
Mierzwinski says, "You can improve your credit score yourself, presuming you are responsible for what's on your credit report. You should educate yourself and learn that the most important way to fix your credit score is to pay off your bills, put them into the past, and pay current bills on time."
The Right Time to Check Your Credit Report
Anyone looking to make a major purchase months or even years from now ought to regularly review credit reports for accuracy. If you want the best interest rate, you need a high credit score, which means your credit report needs to be spotless, or close to it.
It's never too early -- Ulzheimer says that 18 years old is a good time to start -- to look at your credit report, especially if you want to make a major purchase at some point in your future.
"I suspect that many people are interested in eventually owning a house," Ulzheimer says. "It's your largest purchase ever, and therefore it's in your best interest to get the lowest interest rate possible. It can cost tens of thousands over the life of a loan if the rate is higher than you'd like it to be."
This fits into Ulzheimer's contention that excellent credit is an ideal way to build wealth. After all, it's better to pay a 2% annual percentage rate rather than a 4% APR for things you already plan to buy.
