Your Legal Right to a Free Annual Credit Report

Did you know that you are legally entitled to receive a free annual credit report? Don’t feel bad if you didn’t know that, most people don’t. But it is absolutely true. You are entitled to a free annual credit report from all three of the reporting credit bureaus; Transunion, Equifax and Experian, as established by an amendment to the Fair Credit Reporting Act (FCRA). Note that we are talking about a free credit report and not a free credit score. Your credit score is available through credit monitoring companies and can be had for a fee, or as a part of their monitoring and identity theft protection services.

The Distinction Between Credit Reports and Credit Scores

A credit report contains your credit history and is broken down into components. These components include accounts that have been closed recently, open accounts, your payment history, length of your credit history, debt vs. credit limits and recent credit inquiries. It is meant to be a composite picture of your credit-worthiness.

A credit score is a numerical summarization of your credit report. While credit reports can be dozens of pages long, credit scores are three digit numbers ranging from 350 – 850. The higher the number, the better your credit history has been, and the more credit-worthy you are deemed to be by respective credit issuers. A score of 720 or better is considered to be very good and will get the best rates available.

Why You Need A Free Annual Credit Report

Your credit report is a financial snapshot of what you have done over the past ten years or so. It shows all of your credit activity and is looked upon as the bible of your credit-worthiness. It will be looked at whenever you apply for a mortgage, an auto loan, a credit card, or for an apartment rental. And believe it or not, when you apply for a job, many respective employers will look at your credit report as a window to your overall character.

Knowing your credit score can also be quite useful if you are planning a major purchase. If you see that your score is below the 650 mark, you may want to hold off on applying for a mortgage or auto loan until you have had a chance to bring your score up. Remember, the higher your credit score, the more favorable that the terms of the loan will be. Interest rate savings can be substantial. For mortgages, a point or two difference in interest rates can mean tens of thousands of dollars.