Fed Announces Rule Changes for Marketing Free Credit Reports
The confusion over the marketing of free credit reports by companies that require a subscription to a credit monitoring service or other related products and services to receive the free credit report has resulted in intervention by the Federal Trade Commission.
Numerous consumers have seen advertisements touting free credit reports. Most of these advertisements have small disclaimer that explain that there is a requirement that the consumer sign up for a credit monitoring service or similar service that has a monthly charge in order to receive the free credit report(s).
The primary reason why there is a cost to the consumer over this confusion is that there has been no change regarding a consumer’s ability to receive a free credit report annually from each of the big three credit reporting agencies. Federal law mandated that the big three credit reporting agencies make available one credit report per year, with the no-strings-attached.
With the passage of the 2003 Fair and Accurate Credit Transaction Act (FACTA), all U.S consumers are entitled to one free credit report from each of the three major credit reporting agencies, Equifax, Experian and TransUnion upon request every 12 months. The credit reports are available by mail or at AnnualCreditReport.com or by calling 877-322-8228.
A new rule established by the FTC is designed to restrict procedures and actions that might confuse or mislead consumers as they try to get their federally mandated free annual credit reports and end up paying for an unnecessary service.
The FTC press release regarding the new rule changes states that, starting April 1, advertising for “free credit reports” will require new disclosures to help consumers avoid confusing “free” offers – which often require consumers to spend money on credit monitoring or other products or services.
The Federal Trade Commission’s Free Credit Reports Rule will require prominent disclosures in advertisements for “free credit reports.” The FTC example states that any Web site offering free credit reports must include a disclosure, across the top of each page that mentions free credit reports. The notice will read:
THIS NOTICE IS REQUIRED BY LAW. Read more at FTC.GOV.
You have the right to a free credit report from AnnualCreditReport.com
or 877-322-8228, the ONLY authorized source under federal law.
The Web site must also include a link to AnnualCreditReport.com and FTC.GOV.
The amended rule established by the FTC becomes effective April 1, 2010, except in the case of television and radio advertisements, in which the new rules will take effect on September 1, 2010.
No Credit or Credit Score Same as Bad Credit
Good credit and a good credit score is an important facet of our lives whether it is used to buy a house, for employment screening, purchasing insurance or a whole host of other activities that often require a good credit history. For some consumers though, credit is a burden and they prefer to exercise their use of cash and avoid credit.
Since there are so many actions that require a credit score such as renting a car, purchasing things over the phone or the Internet, and even writing a check having no credit and no credit score can be a burden.
For these consumers, improving their credit score is not the problem, it is simply a matter of obtaining credit in order to have a credit score. If you have no credit history, you have no track record of payment and you most likely will not have a credit score. The unfortunate aspect of having no credit history and no credit score is that consumer is considered a credit risk.
Lenders use credit scores to help them determine whether someone is an acceptable credit risk for new credit or whether a creditor will increase or decrease an existing line of credit or even the likelihood that a customer will file for bankruptcy. Creditors are reviewing a credit profile to see a history of how that consumer handles debt. The review of an individual’s credit history may involve reviewing total outstanding debts, minimum monthly payments, even account credit limits. If there is no credit history and no credit score upon which to make a decision, a decision to extend credit is regarded as a risk by most lenders and creditors.
In fact, the automated underwriting approval systems developed by FNMA and FHLMC used for the vast majority of home loan approvals will not approve a loan request in which the borrower does not have a credit score.
There are some things you can do to improve your credit even when your financial situation has turned sour and there are ways to build a credit profile and credit score when there is no credit score to start with. The first issue someone may have when there is no credit score compiled with their credit report, may be that there is a mistake on their credit report.
Credit scores are dependent on the credit reporting agency that the score is based on. The three major credit reporting agencies in the US are Trans Union, Experian and Equifax. Each one of these credit reporting agencies will have a different score for the same consumer since the data in each of the three different credit reporting agencies on which the score is based will generally have slightly different information.
If a consumer finds they do not have a credit score it may be the result of the score being based on data from just one credit reporting agency. It may be that credit histories for accounts paid on time are missing from this credit report or is only recorded in one or two credit reports.
For credit histories that are only in one of the credit reporting agencies files, ask the other agencies to add the data. Send a copy of the statement and the credit report that includes all of the accounts if you can.
If it appears more than one credit report or all of the big three credit agencies are missing accounts that are paid on time, ask the credit reporting agency that these accounts be added to the report. Send the credit bureaus a recent account statement and copies of canceled checks if needed, reflecting the account and payment history. The credit bureau doesn’t have to add account information, but if it is a verifiable account they often will add the data.
A final step is to quickly develop a credit history. A credit card is one of the fastest and easiest methods to build a credit history. Credit cards can be obtained for consumers that have no credit and previous bad credit. Some secure credit cards come with a guaranteed approval with just minimal conditions, none of which include credit verification. It is important to use the credit card to obtain a payment history, though the payments can be made within the grace period to avoid finance charges. A good resource to review competitive credit card offers is www.bestcreditcardrates.com.
Other loans such as secured loans at a bank, major department store credit cards even certain utility bills will work to establish a credit history as long as the bank or utility company reports the accounts to the credit bureaus.
The Big 3 Credit Reporting Agencies
A credit reporting agency is a repository of information that holds an individual’s credit or payment history. An individual’s credit report is created when a request for a report by a lender, credit card company or other authorized party requests it. Credit bureaus or credit reporting agencies hold the consumer’s credit data in their databases. The data is always there but the credit report does not really exist until it is asked for. It is then compiled by the credit reporting agency based on the information stored in the credit reporting agency’s file.
Information in a credit report is supplied by lenders, from court records, credit card companies, banks, mortgage companies and other creditors including the individual to create an in-depth credit report. A credit reporting agency or credit bureau collects and reports the credit information from these sources and retains the data until called for. An individual’s credit history is compiled and maintained by these credit reporting agencies as needed following their procedures and legal guidelines. The information held in the report is also used to calculate an individual’s credit score best a computer scoring model at the credit reporting agency.
There are three big national credit reporting agencies in the United States. Experian, TransUnion and Equifax are the three biggest credit reporting agencies. They are not the only credit reporting agencies in the United States but they are the biggest by a considerable degree. There are many smaller, regional and even industry specific credit reporting agencies that provide clients with credit reports. There are also many different international credit reporting agencies that operate in specific regions.
These big credit reporting agencies are the ones in which most of the attention about credit reports and credit scores is focused on because they maintain the largest national databases of consumer credit information. The big three credit reporting agencies perform two similar basic services: collecting and reporting credit information.
The three credit reporting agencies are independent of one another and though they conduct their business of data gathering to compile credit reports in a similar fashion they do not operate in the same way. This is the primary reason why consumers who obtain a credit report from the three largest credit reporting agencies get a report back with some different data. Therefore, a credit report from Experian will contain slightly different information than a credit report from TransUnion and Equifax. Not every creditor and lending institution such as credit card companies, banks or mortgage lenders report to all three credit bureaus, leading to additional difference between the three big credit reporting companies.
The majority of the credit data supplied to a credit reporting company is on a voluntary basis. A credit card company or lender can choose to supply the data or simply not choose to be burdened with the responsibility of supplying data files on their customers to the credit agencies. A common example of this is small and regional credit unions. It is likely that loans and credit accounts from these entities will not be found in a credit report. However, thousands of creditors, lenders and other businesses do send credit information and updates to each of the credit reporting agencies, frequently once a month.
The lending institutions and other creditors that do not supply information, send updated consumer credit information to one or more of the big three credit reporting agencies. The information often includes how much the consumer owes at that institution, the original amount of money extended, when the account was opened and the payment history. The same lending institutions and creditors that supply information to credit reporting agencies may also be the ones requesting credit reports when a consumer applies for credit.
The three credit reporting agencies also review public records for information, such as court records from bankruptcies, foreclosures and legal judgments. Information retained also includes recorded information about credit applications and credit inquiries.
TransUnion, Experian and Equifax now market their credit reports directly to consumers, in addition to its primary business of providing the reports to potential creditors. The big three credit reporting agencies can be contacted at the following numbers. Please note, in order to get your free credit report you want to go to annualcreditreport.com or call 877-322-8228. All of the services performed by the big three offered directly to the consumer are fee based.
Equifax, Inc. is a consumer credit reporting agency that is one of the big three credit reporting agencies. The company was founded in 1899 and is the oldest of the three agencies. Equifax is based in Atlanta, Georgia.
For general information and to order a credit report or score directly from Equifax you can contact the company at:
www.equifax.com
800-685-1111
P.O. Box 740241, Atlanta, GA 30374
Experian is a consumer credit reporting agency, also part of the big three credit reporting companies.
General information and credit report order information can be obtained at:
www.experian.com
888-EXPERIAN (888-397-3742)
P.O. Box 2002, Allen TX 75013
TransUnion is a consumer credit reporting agency, considered one of the big three agencies. TransUnion was created in 1968 and is based in Chicago, Illinois.
General information and to order credit report and score:
www.transunion.com
800-888-4213
P.O. Box 1000, Chester, PA 19022