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Money Tool for January: Your Credit Report

While we're thinking about our finances, starting a new year, getting our tax information in order - it's a good time to remember to review our credit reports. Here are some facts everyone should know:

How important is reviewing my credit report?

The National Association of Public Interest Research Groups (PIRGs) released an update on credit file mistakes that says overall, one in four credit reports contain errors serious enough to bring about a denial in credit. And 79 percent of all credit files reviewed contain mistakes, many of which are not significant enough to sidetrack a credit application, but are typos, incorrect dates and other data entry errors that can lead to confusion over identity or result in higher interest or insurance rates.

The three major credit bureaus, Experian, Equifax, and Trans Union, maintain files on nearly 90 percent of all American adults. Those files are routinely sold to credit grantors, landlords, employers, insurance companies, and many others interested in the credit record of a consumer, often without the consumer's knowledge or permission.

Several studies since the early 1990s have documented sloppy credit bureau practices that lead to mistakes on credit reports for which consumers pay the price. Consumers with serious errors in their credit reports can be denied credit, home loans, apartment rentals, auto insurance, or even medical coverage and the right to open a bank account or use a debit card. Consumers with serious errors in their reports who do obtain credit or a loan may have to pay higher interest rates because the mistakes falsely place them in the sub-prime, high-cost lending pool. They may also pay higher rates for auto insurance.

How do I get a copy of my credit reports?

In several states (Colorado, Maine, Maryland, Massachusetts, New Jersey and Vermont), all consumers are entitled to at least one free credit report each year from each of the three credit reporting agencies. This year, a new federal law expands this benefit to all Americans; this benefit is being rolled out, starting on the west coast in December 2004 and ending in the Northeast in September 2005.

To order your credit reports under this new law, click on www.annualcreditreport.com, call 877-322-8228, or complete the Annual Credit Report Request Form and mail it to:

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

The form can be printed from www.ftc.gov/credit.

To receive your free credit report under this law, do not contact the credit reporting agencies directly; use the above contact information.

If you don't want to wait until this is available in your area, you can request a credit report directly from each of the three credit reporting agencies. Again, in some states, including Massachusetts, you are already entitled to one free report each year; if you live in another state not yet covered by the federal law, you may have to pay for a copy, usually around 8 or 9 dollars from each agency.

Experian: www.experian.com. Free reports available on-line.

TransUnion: www.transunion.com. Free reports available by mail only.

Equifax: www.equifax.com. Free reports available by mail only.

Be sure to look carefully on each web site for instructions on how to receive a free credit report if you are entitled to one under your state law.

There are also various services on each credit reporting site that, for a fee of from $29.00 and up, will provide you with all three reports, sometimes by email or on-line, other times by mail. These services are convenient, and some provide your credit score free or for an additional fee. Many other web sites also offer this service, but be cautious: some are fronts for credit repair or consolidation services, and you may get on an email list to receive spam. Also be careful you are not signing up for on-going credit monitoring services; they can be costly, usually charging a monthly fee.

What should I look for?

First, check the accuracy of your identifying information. Then, check the accounts listed and dates of activity. Be sure each account was actually your account. Then look at each entry and check to be sure all information is correct, particularly the on-time payment history and current balances. While you're at it, see if there are any accounts listed as still open that you no longer use; be sure to close them out, as all open credit lines are considered when applying for new credit. You'll need to contact each creditor to request an account be closed.

How do I get the errors corrected?

If you find an error, contact the credit reporting agency to request a correction. Their web sites (listed above) have instructions on how to do this. If you purchased your report on-line, you may have an option to request the correction on-line. The credit reporting agencies have 30 days from the date of your request to correct your file; you should request an updated record to be sure the correction was done accurately. If not, contact them again until the correction is done.