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:
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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- Holden, Lewis. "Free credit reports available to all." BankRate. September 1, 2005. http://www.bankrate.com/brm/news/cc/20010223c.asp
- Perkins, Broderick. "Consumers wresting credit scores from 'gatekeepers'." Realty Times. June 2, 2000. http://realtytimes.com/rtpages/20000602_creditscores.htm
- Wozniacka, Malgorzata and Sen, Snigdha. "Credit scores - what you should know about your own." PBS. November 23, 2004. http://www.pbs.org/wgbh/pages/frontline/shows/credit/more/scores.html
- Yerak, Becky. "Credit score commercials not catching on." Chicago Tribune. July 20, 2007. http://www.chicagotribune.com/business/chi-fri_notebook_0720jul20,0,4376140.story
- "Consumers comfortable, but see room for improvement." Experian, Gallup. March 16, 2006. http://www.personalcreditindex.com/PCI_Site/Gallup_Archive_Content.aspx?id=13
- "Fair and Accurate Credit Transactions Act of 2003." U.S. Congress. 2003.http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=108_cong_public_laws&docid=f:publ159.108.pdf
- "Free annual credit report - what consumers should know." Michigan Attorney General's Office. http://www.michigan.gov/ag/0,1607,7-164-34739_20942-111010--,00.html
- "How credit scores work, how a credit score is calculated." BankRate. http://www.bankrate.com/brm/news/credit-scoring/20031104a2.asp
- "Consumer credit reporting companies introduce VantageScore." VantageScore. March 14, 2006. http://vantagescore.com/
- "Your access to free credit reports." U.S. Federal Trade Commission. http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre34.shtm