Is there such a thing as a free credit report?

Banking Image Gallery Everyone from potential employers to mortgage lenders look at your credit report when considering you. They have to pay for the reports, but can you get yours for free? See more banking pictures.

Your credit report is an important thing. It’s kind of like a passport to living in the 21st century. With a good score (based on your credit history), it’s much easier and much less expensive to get loans, be insured, and even get a job. And since it’s a detailed listing of what kind of a borrower you are, it’s also important to look at your credit report occasionally to make sure it doesn’t contain mistakes.

The three major credit reporting companies -- Equifax, Experian and TransUnion -- make their money by analyzing and reporting on how you live your financial life. These companies use mathematical models to calculate what kind of risk you pose to someone who is considering lending you money. The formulas the credit reporting bureaus use are based on the original credit scoring model created in the mid-20th century by the Fair Isaac Corporation. Fair Isaac’s model is the industry standard, which is why your credit score is usually called your FICO (Fair Isaac COrporation) score.

You can read about credit scores in more detail in How Credit Scores Work, but essentially, they work like this. Your personal data (like your age, where you live, your Social Security number and the like) is attached to your financial information. This includes the payments you’ve made, the amount of credit available to you, how much debt you have, the types of loans and credit you have outstanding, and the age of your credit lines [source: BankRate]. All of this information is crunched into the scoring formula, and your FICO score -- a number between 300 and 850 -- is tabulated.

If this sounds like a lot of work, it is. The credit reporting bureaus compiled about 4.5 billion pieces of data every month in 2003, culminating in more than one billion completed reports issued that year [source: PBS]. That’s one-sixth of the global population.

These reports are products the credit reporting bureaus sell to potential lenders, employers, insurance companies and others looking into your background. And selling your personal information is big business: A 2006 report lists nearly $4 billion in combined annual revenue for two of the three major credit reporting agencies alone [source: VantageScore].

Since the information these companies sell is based on accounts of your activities, you should be able to access your report free of charge, right? You can, but there are restrictions attached. What's more, there are credit report scam artists to watch out for. Read the next page to find out how to legitimately receive your free annual credit report.

Free Credit Report: A Right and a Rip-off

The Federal Trade Commission is the agency charged with ensuring that standards for credit reporting and scoring are followed by credit bureaus.
The Federal Trade Commission is the agency charged with ensuring that standards for credit reporting and scoring are followed by credit bureaus.
Paul J. Richards/AFP/Getty Images

The history of credit scoring goes back more than 100 years, but it wasn't until 1989 that it became a globally dominating concept. This was the year that Equifax issued the first all-purpose FICO score [source: Fair Isaac]. While banks, employers, insurance companies and credit card companies could pay to get a copy of it, the reporting agencies refused to allow consumers to see their reports or scores for many years [source: Realty Times]. Businesses were trading individuals' financial information, but no one was allowed to dispute any errors or misinformation; this gave many consumers a bad taste.

As a result, the U.S. government created a series of legislation to address problems with credit reporting and scoring. Together, the Fair Credit Reporting Act of 1970, the Consumer Credit Reporting Reform Act of 1996 and the Fair and Accurate Credit Transactions Act of 2003 more tightly regulated the credit reporting industry. These acts direct credit reporting companies to:

  • alert consumers to cases of suspected credit fraud
  • take measures to protect against identity theft
  • allow consumers to see their credit reports
  • give consumers their credit reports for free [source: General Printing Office]

Under the Fair and Accurate Credit Transactions Act, all Americans are entitled to one free copy of their credit report every 12 months. This holds true with all three of the major reporting agencies. So if you're American, you can get one report from each agency per year [source: FTC].

There's only one place to get your nationwide free credit report -- the key word here being "free." A joint organization called the Annual Credit Report Request Service (ACRRS) was set up as a clearinghouse by the three major reporting agencies to handle requests for free credit reports. Requests can be made online, through the mail or over the phone (look for the link to the ACRRS site on the Lots More Information page).

Even before the federal legislation was in place, some states had already established laws that gave their residents rights to one or more free credit reports per year. These laws are still in place (in addition to the federal law), but when requesting an additional credit report during the year under state law, you must contact each credit reporting company directly. Other states have set limits on the amounts companies can charge for additional credit reports [source: BankRate].

The advent of laws mandating free credit reports inadvertently gave rise to related scams. Identity thieves can obtain your personal information by posing as representatives for the annual free credit report. In other cases, some companies have been named to sound like they can provide the federally mandated annual free credit report. The FTC suggests getting around this by not responding to e-mails, Web pop-ups or phone calls concerning your free credit report, and dealing only with the ACRRS [source: FTC].

Ironically, despite the uproar over the secrecy in credit reporting of years past and the laws that ensued to make the process more transparent, many Americans don't know what's in their credit reports. A 2006 poll found that only 28 percent of Americans said they were "very likely" to check their score that year [source: Gallup]. A 2007 poll found that just 29 percent of Americans had approximate knowledge of what a credit score is [source: Chicago Tribune].

For more information on credit reporting and other related topics, visit the next page.

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  • Perkins, Broderick. "Consumers wresting credit scores from 'gatekeepers'." Realty Times. June 2, 2000.
  • Wozniacka, Malgorzata and Sen, Snigdha. "Credit scores - what you should know about your own." PBS. November 23, 2004.
  • Yerak, Becky. "Credit score commercials not catching on." Chicago Tribune. July 20, 2007.,0,4376140.story
  • "Consumers comfortable, but see room for improvement." Experian, Gallup. March 16, 2006.
  • "Fair and Accurate Credit Transactions Act of 2003." U.S. Congress. 2003.
  • "Free annual credit report - what consumers should know." Michigan Attorney General's Office.,1607,7-164-34739_20942-111010--,00.html
  • "How credit scores work, how a credit score is calculated." BankRate.
  • "Consumer credit reporting companies introduce VantageScore." VantageScore. March 14, 2006.
  • "Your access to free credit reports." U.S. Federal Trade Commission.