The Truth About 'Free' Credit Reports
How many of us have looked at anything offered to us for "free"?
Not me? Of course I have. In this day in age when gas prices are
listed as "Arm" and "Leg", providing health insurance for your
family costs more than some mortgage payments and the cost of
raising kids looks like a hockey stick pasted onto a graph, you
bet I look at offers to save money.
Therein lie's the problem. It seems like the vast majority of
American consumers are desperate to cut costs, any costs, and
will jump too soon at offers promising to do just that.
Sometimes when you combine a cost cutting mentality with the
importance of credit, not only to purchase the big ticket items
important to us, but more and more to simply survive in this
economy, desperation happens. Unfortunately, the marketers know
this too. So, without a little education anyone can get confused
and the likelihood of being taken advantage of increases
significantly. The good news is that just a little education
will save you plenty.
Take for example, the term "Free Credit Report". It now ranks
right up there with the ubiquitous, "new" and "improved". "Free
Credit Report" has become part of that lexicon of advertising
buzz words that are absolutely meaningless to me. But for many,
there is much confusion over this term. Why? I think mainly
because it has been announced that federal law dictates we are
all entitled to a free credit report on the front page of all
the newspapers.
We know everyone wants a free credit report, which is why we
started the Iwantafreecreditreport.com site. People naturally
want something that is mandated by law to be at no cost, is
front page news and is so incredibly important to each of us if
we want to purchase just about anything. We know people want
their free credit report and because most all of us work so hard
for our money, we think people deserve hearing the truth about
the subject. That is why we even put a section on our page
entitled, "The Truth About Free Credit Reports".
So, is it not true? Yes, it is true, it's just that the devil is
in the details and the resulting confusion has been a bonanza
for those seeking to cash in on the confusion. In fact, each of
us in the good ole U. S. of A. is entitled to a free credit
report. But, how do you get it? Where do you get it? Who is
giving it to you? Why is it being offered for free? And most
importantly, who cannot offer you one for free?
Who cannot offer a free credit report? Let's start with the last
one first because it shines a lot of light on the rest of the
questions. Any company, web site or service that is in business
for a profit and is not named Experian, Trans Union or Equifax
is not able to provide anyone at any time with anything remotely
resembling a credit report free of cost. Period. End of story.
Got that? Further, there is one place set up on the web to get
free copies of credit reports at no cost and it is:
www.annualcreditreport.com . We'll talk more about this site a
little later but, other wise, caveat emptor, let the buyer
beware.
How then are these offers being made? Look closely, the "Free"
report is usually offered initially upon signing up for a
service that charges your credit card each month for monitoring
your credit. If you cancel the service just in the nick of time,
before the charge is made to your card, you will get it at no
cost. What a hassle! And the bet is you will wake up at least
one, if not a couple or more months later with several charges
to your card. You think these guys make foolish bets?!
Then what caused a free credit report to be offered on the front
page of newspapers, who is providing them and how and where do I
get one? Due to the importance of consumer credit history,
identity theft and complaints from consumer rights groups about
having to purchase a credit report in order to gain knowledge
about the contents shown on individual consumer reports, even if
it was reported inaccurately, a change was mandated. The Fair
and Accurate Consumer Trade Act (FACTA), a revision of the Fair
Credit Reporting Act, provided for one credit report free of
charge from the reporting agencies (Experian, Trans Union and
Equifax) every twelve months, if and only if, you haven't
received a credit report in the previous twelve months. The
consumer, by either mailing a written request to the three major
credit reporting agencies or going to www.annualcreditreport.com
one can obtain the free report if they meet the criteria. This
program was and is being phased in to sections of the country by
the credit reporting agencies starting in the western states,
with the northeastern states at the time of this writing still
to come.
However, Pamela Yip of The Dallas Morning News writes that even
this has not been without its problems. "The Federal Trade
Commission said Experian Information Solutions Inc., one of the
three major credit bureaus, settled complaints that it
"deceptively marketed 'free credit reports' by not adequately
disclosing that consumers automatically would be signed up for a
credit report monitoring service and charged $79.95 if they
didn't cancel within 30 days.... With the help of the Federal
Trade Commission, the bureaus established
www.annualcreditreport.com as the only authorized online source
for consumers to get a free report under federal law. While many
consumers haven't had any problem getting their reports, others
say they've been hit with sales pitches for products and
services from the credit bureaus or were diverted to imposter
sites. The FTC said the company led consumers to its
www.freecredit report.com and www.consumer info.com Web sites.
Radio, TV, e-mail and Web ads promised free reports and "a bonus
- free trials of a credit-monitoring service."
The FTC said consumers "were assured that: 'Your card will not
be charged during the free trial period. However, valid credit
card information is required to establish your account.' " What
the Web sites didn't adequately disclose is that consumers would
be charged the $79.95 annual fee if they didn't cancel within 30
days, the FTC said.
"ConsumerInfo billed the credit cards that it had told consumers
were 'required only to establish your account,' and, in some
cases, automatically renewed memberships by rebilling consumers
without notice," the agency said.
As part of the settlement, the FTC required ConsumerInfo.com, an
Experian company, to "give up $950,000 in ill-gotten gains."
Experian also has agreed to provide refunds to consumers who
purchased credit-monitoring products and ordered a free credit
report between Nov. 1, 2000, and Sept. 15, 2003.
"It's unfair and deceptive to promise consumers something for
free and then trick them into paying for products they didn't
want in the first place," said Lydia Parnes, director of the
FTC's Bureau of Consumer Protection.
"It wasn't an attempt to mislead at all," said Peg Smith, an
Experian executive vice president. "We absolutely deny any
wrongdoing." She does acknowledge that consumers may have been
confused.
"To the effect that our product offering has caused that
confusion, we certainly regret that," Ms. Smith said. "We
encourage consumers to read the language in any disclosure on
any Web site, including our own."
The FTC also requires ConsumerInfo.com to state clearly that its
free credit report offer isn't related to the federal program."
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And in the interests of full disclosure, no one credit report or
combination of three credit reports by and of themselves is
sufficient to educate oneself about where you stand as a
consumer in the eyes of a lender. Imagine a high speed race boat
zooming across a lake at top speed without a steering wheel.
Where it is going is a complete mystery but one thing is for
sure, it will crash and crash quickly unless you get control.
That's right, you. Because without your credit scores and the
knowledge about what they mean, how they were calculated or how
a lender views them, you are headed for a crash.
No bank, credit card issuer, mortgage company, retail store or
any other credit provider will grant you any item, service or
product without looking almost exclusively at your credit scores
and the average person has no idea what their scores are and
even if they did, many if not most, wouldn't know what they
mean.
For example, most people don't even know that repeated "pulling"
of your credit reports by potential credit grantors lowers your
scores by as much as four points per "pull". You start
"shopping" around for the best rate on a credit card by allowing
each credit issuer to run a credit report on you and your score
will take a dive. The difference between a 699 score and a 700
represents thousands and thousands of dollars in interest.
Often, credit issuers don't make it perfectly clear that your
credit history is being accessed when you respond to their offer
for a new card over the phone. The call center sales
representative also doesn't explain and state clearly to you,
that your credit history will show an "official inquiry" which
counts against your scores whether you are accepted or rejected.
Most people don't know that a maxed out credit card lowers their
scores even if they pay on time every month. Many don't know
until it is too late that one late payment on one credit card
will cause the interest rate charged to skyrocket not only on
that card but any other cards that have a balance! Most also
don't know that a credit card balance showing less than thirty
per cent of the available balance improves the score. Most don't
know that in calculating credit scores, your payment history
counts as 35% of the score, amounts owed count 30% of the score,
length of your credit history counts 15% of the score, new
credit is 10% of the score and types of credit in use is 10%.
What is the truth about free credit reports? The truth, is that
consumers need to read the fine print very, very carefully and
get educated. The truth about credit reports in general is that
only part of the story is being told by one. The truth, is that
knowledge is power and without it your money is being taken from
you, your buying power and therefore your future is being
dictated to you rather than by you and that the cost of
everything including insurance is based on your scores.
If asked for my advice to the average consumer? Worry less about
getting a "free" report and more about the real cost of being
ignorant regarding credit. Worry more about the immediate and
long term costs of not taking control of what is reported on
your credit report both the correct and incorrect. Gain some
credit knowledge. It is easy to do and will literally save you a
fortune. One thing is absolutely for sure, your money and future
and your children's future will be severely impacted by your
credit. How, is up to you.