There are many misconceptions about the free government credit report that is available to consumers under the Fair Credit Reporting Act. This act requires each of the three major consumer credit reporting agencies (Equifax, TransUnion and Experian) to provide consumers with a free copy of their credit report once a year if you request it.
These credit reports include a lot of information, including where you live, your payment history for debts that get reported to the bureaus, any judgements that you may have against you, bankruptcies you may have filed and more. This information makes up credit report, and is used by lenders when deciding whether or not to make a loan to you.
All of this information is great to have, and important to check for accuracy, but there is a downside to these free credit reports. The downside is that the free government credit report is just that, a credit report. It does not include a score, which is perhaps the most important aspect of your report. Without a score, it is difficult to know whether you need to work on improving your credit in order to hit certain breakpoints that lenders require.
Many lenders have specific scores that must be met in order to obtain a loan from them. Typical breakpoints may occur at 660, 680, 700, 720 and 740. Without the score to go with your report, you are in the dark with regards to what kind of loan you may qualify for.
In addition, these free reports are only single bureau reports. When applying for something such as a home loan, the lender is going to use a tri-merge report, and take the middle score from that report for purposes of determining your credit worthiness. You really need to be able to see all three reports and scores to get a full understanding of your credit worthiness.
While the free government credit report is one important tool, it is also important to know and maintain your score. There are many credit monitoring sources that will give you scores with your reports, and for those truly interested in position themselves in the best possible manner to obtain a loan, this may be the direction you should go.
In addition to the annual free credit report entitled to you each year from each bureau, you also are entitled to a free report if a company makes an adverse decision about you based on your credit report. This could consist of denying you a loan or employment based on what is contained within your credit report. In this situation, you can ask for your report within 60 days.
Knowing what is contained within your report is very important for defending against fraud and errors in reporting. It is better to keep your credit clean so you do not get any nasty surprises when you actually need to use it for something. Cleaning up mistakes on your credit report can be a time consuming task, and doing it when you don’t actually need your credit is always best.
