More often than we’d like to imagine, there might be major mistakes in the information that vendors report to credit bureaus – and these mistakes can impact you and your credit rating in a dramatic fashion.  Even something as simple as stating that a payment was late when it wasn’t or assigning a bad account to your name can drag down your credit score.

In addition, while small administrative errors are the bulk of what you might find in your report, a regular review of your report might bring to light something of even more concern, specifically identify theft.  The best way to protect yourself is to take advantage of your access, under law, to an annual free credit report.

Where Does My Annual Free Credit Report Come From?

Three private companies, specifically Experian, EquiFax and TransUnion, accept reports from private vendors, bankers, merchants and others about your payment patterns.  This information is used to determine whether you can be seen as a “good” or “bad” risk to pay back any money another individual would loan you.  In fact, credit reports are used frequently – by everyone from landlords to employers – as a measure of your trustworthiness with money.

In fact, your credit report, and specifically the credit score generated from the report, determines whether and on what terms you will be offered credit.  Some of the decisions that will be made based on your score include:

• Whether you will be extended enough credit to buy something you want, like a car
• Whether you will be offered an apartment you’ve applied for
• How high your interest rate will be on a mortgage
• Whether you will be offered a job that requires money management

How Can I Get a Annual Free Credit Report?

First of all, be aware that recently passed laws require each of the three credit monitoring and reporting bureaus to give you one copy of your credit report absolutely free once per year.  If you find problems or inconsistencies on the report, you are entitled to additional free copies of the report until it is corrected.

Unfortunately, some of the advertising surrounding the concept of a “annual free credit report” has been a little misleading.  For example, at the domain name www.freecreditreport.com, Experian is offering what it calls a “free credit report.”  However, this report is free only if you agree to sign up for a trial membership in Experian’s reporting service – a membership that will cost you $15 per month after the trial ends.  That doesn’t sound very free, does it?

The truly annual free credit report can be found at www.annualcreditreport.com.  This is the system required by federal law that allows you to check your report for free once-per-year.  Utilizing your social security number the system offers you access to the records maintained by the three agencies.

In short, be sure to take full advantage of the annual free credit report.  A thorough review and fixing of any problems may be what saves you from paying hundreds of dollars in extra fees and interest on your lines of credit.