What no one will tell you about your “free” credit report

If your New Year’s resolution includes a financial tune-up, then you’re probably about to pull your “free” credit report. You’ll want to read this first.

No, this isn’t a warning about the credit report scams that litter the internet. You know, the ones that try to convert you to a pricey service after an initial trial period. I’ll defer to our friends at the Federal Trade Commission for the details on that particular ripoff.

This is about the supposedly real deal, the report you can get by visiting Annualcreditreport.com.

When words like “free” get tossed around this much, you’re bound to run into disappointments, and the information you’ll extract from the three credit reporting agencies — Equifax, Experian and TransUnion — is no exception. The numbers can be difficult to access, hard to understand and incomplete. I know, because I just tried to access my own credit reports.

Credit reporting agencies aren’t sending you the report because they want to. The Fair Credit Reporting Act requires these agencies send you the reports during any 12-month period, upon request “and without charge.” But they don’t have to make it easy — and they don’t.

You may not be able to immediately access your information
In order to verify your identity, the credit reporting agencies will ask you a series of questions. For two of the agencies, I passed the test (with some difficulty) but one of them refused to issue the report. Instead, it mailed a letter to my address with a secure link. That makes some sense, except for one small thing. The questions asked by the agency were unanswerable. They asked me to choose between several recent car purchases, none of which I had made.

It’s confusing
“At first glance a credit report can seem overwhelming,” says Ian Atkins, an analyst for Fit Small Business. “If you’ve been using credit for more than a couple years a credit report can easily run to 20 pages or more.” Don’t be put off. A lot of the information is redundant, showing the same type of information over and over again for each account you have. If you check your report regularly, you’ll learn to skip the repeat information.

There’s no score
That’s right, the most important part of the credit report — your score — is missing. “While these companies will provide each individual with their personal credit report at no charge, the credit score, which is derived from the credit report, is only available for a one-time fee, usually around $8 for each company,” says Josh Alpert, founder and president of Alpert Retirement Advising in Southfield, Mich. Why do they charge for the score? Because they can.

Other information is missing
For example, your credit report doesn’t include anything you defaulted on 10 years ago or more. You won’t find the interest rates you pay on your loans. Nor will there be any references to your race, gender or religion, or information about your political affiliations, criminal records, medical records, and marital status. That’s a lot of missing information, says Salwa Ebrahim, a spokeswoman for Cherry Creek Mortgage Company in Tempe, Ariz. “You have to know what to look for,” she says.

Someone is watching
Another potential shocker: A long list of “soft” inquiries of entities who pull your report for a variety of reasons. “Don’t panic,” says Kristen McGrath, financial expert at CreditCardForum. “Not all these inquiries are affecting your score. Banks pull your credit all the time to prequalify you for offers, and all the free credit-scoring sites you signed up for will as well.” The ones that don’t lower your score use language like “promotional inquiries” and “inquiries shared only with you.” The score-lowering “hard” inquiries will be labeled as “regular inquiries” or “inquiries shared with others.” If the soft inquiries bother you, you can do something to block lenders from soft-pulling your credit for pre-approvals at OptOutPrescreen.com.

So how did my credit report turn out? Fairly undramatic. I was disappointed to not see my credit score, and like many consumers, I found it difficult to initially understand some of the agency terminology. But then, I’m one of the most financially boring people you’ll ever meet. I’ve lived debt-free for more than a decade, and frankly, my credit score doesn’t matter because I never ask for credit.

But I’m unhappy that the credit reporting agencies don’t tell people what they really want to know — their score. It’s a little bit like going to school but then not receiving a report card at the end of the year. Or, as Robert Siciliano, CEO of IDTheftSecurity.com, notes, it’s like going to the doctor without getting a diagnosis. “A credit report without a credit score is insufficient,” he says.

You can improvise. Experts say you can estimate your credit score at no charge using FICO scores estimator, based on the information you pull from your credit report. In the end, my bank generously allowed me to view my FICO score without charging me. If you must know, my scores are about average.

Something is wrong — very wrong — about the way credit scores are collected and dispersed. My credit report should be available to me jargon-free, without taking an impossible multiple-choice test. If I earn a credit score, shouldn’t I have the right to know what the grade is without forking over more money? And shouldn’t I also be able to see who’s checking my score in real-time, without being charged again, rather than waiting until after 12 months has elapsed?

Of course. But then, the credit reports were not written for you and, if there were no federal law, the credit reporting agencies wouldn’t fork over a bit of the data without you having to pay for it. It’s not our system. We’re just a product to be graded. Something they won’t tell you when you ask for your “free” credit report — but they probably should.

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