Credit & Money Management
A Peek at Your Personal Dossier
Soon you can get a free credit report. Here's why you shouldn't wait.
By Pat Mertz Esswein, Associate Editor
From Kiplinger's Personal Finance magazine, November 2004
- Comments
- Email This Article
- Print This Article
- Order a Reprint
Advertisement
Starting in December, you will no longer have to pay to see what's inside the personal dossier that creditors, insurance companies, potential employers and landlords check before deciding whether or not to do business with you. For years, you've had the right to see your credit report free only after you've been denied credit. But a new federal law gives you a free, once-a-year look so you can check for errors before they inflict financial harm.
That sounds great, but don't wait for a freebie. Although residents of 13 western states gain free access on December 1, the rule will be phased in gradually across the rest of the country, with the final 14 states and the District of Columbia not coming on board until September 1, 2005 (see below).
Making sure your report is error-free is so important that you should shell out the $40 or less it now costs to check it. Getting a head start might also make it easier to correct any errors if the free-for-all unleashes a torrent of complaints that clogs the system.
To see why it's so important, consider the problems that a flawed credit report caused Christopher Satterfield. The 36-year-old businessman from Nevada City, Cal., is still fighting a battle that began in 1998 when the state of California erroneously filed a tax lien against him. That black mark was duly picked up by the three major credit-reporting bureaus -- Equifax, Experian and TransUnion. The first inkling Satterfield had of a problem was when he was offered an unexpectedly high interest rate on an auto loan.
A hard-won letter from the state admitting its error persuaded two of the three bureaus to expunge the lien from his record. But Experian stood firm. As a result, Satterfield says he has paid thousands of dollars in extra interest on auto loans and credit cards, encountered difficulty obtaining financing for his retail-development company and put off buying a house because of the extra point he and his fiancée would have had to pay for a mortgage.
He finally hired attorney Paul Smith, a member of the National Association of Consumer Advocates. Experian corrected Satterfield's report within a month of being served. Smith is also representing Satterfield in a suit against Experian seeking unspecified damages. "It was a nightmare -- so much time, so many appointments, so much to get something so simple removed," says Satterfield. "I felt like I was held hostage by the credit bureau."
When you realize how easy it is for errors to creep into this compilation of personal data, credit history and public information, it's easy to see why an annual checkup is in order. In the marketplace, your credit report represents your risk to prospective creditors, and an error could cost you the ability to get credit or force you to pay higher interest rates. It can also affect housing, employment and insurance decisions.
"It's our number-one consumer tip: Get your credit report once a year--better yet, twice a year. It's like getting your teeth cleaned," said Beth Givens, director of the Privacy Rights Clearinghouse, in San Diego. It's also a good idea to order one a few months before you buy or refinance a house. Before the freebies arrive, it will cost $30 to $40 to get reports from all three bureaus (see box on the right).The odds of error
No one knows how common mistakes are, but a widely reported survey by the Public Interest Research Group earlier this year found that 79% of 197 credit reports it reviewed contained mistakes of some kind, such as false delinquencies and accounts that didn't belong to the customer. This was a small and unscientific sampling, but it's undeniable that the potential for error is huge. Each of the three major bureaus receives 2 billion pieces of information each month, and together they issue about 1.3 billion credit reports every year.
"The system is set up by the credit bureaus for cost and efficiency, more so than for accuracy," complains consumer legal advocate Leonard Bennett, of Newport News, Va., who has testified before Congress on this issue.
