Costly Free Credit Reports

By Heather Wells (Recovery Advocate)

Do an online search for “free credit report” and you’ll end up with a dozen or more websites promising online credit reports (and often credit scores) for FREE. Most of these companies even have the word “free” in their name, but don’t be fooled, there’s nothing FREE about their services. Many will entice people to sign up for a product that comes with strings attached. Most will request a credit card number to enroll and then will charge you if you do not cancel the service within a specific grace period.

A recent post (July 24, 2007) on the blogsite The Red Tape Chronicles written by Bob Sullivan explains that “one site, for instance, requires enrollment in pricey credit monitoring service, which can only be canceled online after precisely 23 days. Another automatically enrolls users in a discount travel service. And some hint that the real free credit report site established by Congress -- AnnualCreditReport.com -- isn’t all it’s cracked up to be.” He goes on to say that many of these sites actually can be traced back to the credit bureaus either directly or by affiliation.

There’s only one legitimate source where you can obtain your FREE credit reports and that’s http://www.annualcreditreport.com/. The law requires that each of the major credit reporting agencies-Equifax, Experian, and TransUnion-give you a copy of your credit report every year at no charge. This law was passed as part of the Fair and Accurate Credit Transactions Act (FACTA) and was a real milestone for consumer rights.

Increased consumer awareness and knowledge is a good thing. It’s a positive sign that more folks are interested in what’s being reported in their credit files. Everyone should check their credit reports at least once a year to make sure that all of the information contained in them is accurate and up to date. You should also check your reports for any information that is fraudulent, which could signal that you are the victim of Identity Theft. This includes accounts as well as personal information such as addresses and phone numbers.

So, before you give over your credit card number for something that is supposed to be “free,” don’t do it. Go to http://www.annualcreditreport.com/.

Freezing your Credit Report not a Panacea

by Doug Pollack

This week Terri Cullen of the Wall Street Journal (July 18, 2007) reported on how to use your credit report to protect against identity theft.

The article includes a lot of useful information on how to "interpret" your credit report and how to correct errors in your credit report. But it also touches on the option that is available in some number of states of "freezing" your credit report.

"As an additional barrier to identity theft, several states allow consumers to issue a "freeze" on their credit reports, meaning that the credit bureau cannot release your credit report to anyone without your approval. Very few lenders are willing to extend credit without seeing a copy of an applicant's credit report, so the freeze generally stops an identity thief from using your information to obtain a loan. If you live in a state that requires a credit bureau to honor your request for a freeze, you still have to initiate the freeze with each credit bureau independently."

While the idea of freezing your credit sounds like a failsafe way to avert identity theft, unfortunately this isn't the case. Identity thieves have become very clever and found ways to misappropriate your identity even with a frozen credit report. There are also a number of "inconveniences" that come into play when you choose to freeze your credit. As Mr. Cullen goes on to state:

"First, it's probably going to cost you unless you've already been a victim of identity fraud. Florida, for instance, allows a credit bureau to assess a $10 fee to place, temporarily lift or permanently remove a credit freeze. And you'll be incurring that fee each time you want to apply for new credit. It also takes a few days to get the freeze temporarily lifted, so no more impulse purchases using a retailer's offer of discounts in exchange for signing up for the store's revolving charge card. And there's the inconvenience of keeping track of the PIN that the credit bureau issues you when you first place the freeze. You'll need that PIN each time you want to lift the freeze."

And while a credit freeze can help keep an identity thief from opening most new accounts in your name, it’s not a means of protection from all types of identity theft. It will not protect you, for example, from an identity thief who uses your existing credit cards or other accounts. There are also new accounts, such as telephone, wireless, and bank accounts, which an ID thief can open without a credit check. In addition, some creditors might open an account without first getting your credit report. And if there’s identity theft already going on when you place the credit freeze, the freeze itself won’t be able to stop it. While a credit freeze may not protect you in these kinds of cases, it can protect you from the vast majority of identity theft that involves opening a new line of credit.

Does Credit Monitoring Prevent Identity Theft?

by Rick Kam

Credit monitoring is an important tool in today's fight against identity theft. Many individuals subscribe to a service provided by all three of the major credit bureaus and their affiliates.

Is this an effective tool that prevents identity theft?

Unfortunately, the answer is no. Credit monitoring provides a useful tool to determine if there is an unauthorized change to your credit profile which may indicate misuse by an identity thief.

It does not prevent an identity thief from setting up fraudulent credit lines, changing your address, getting a job in your name, declaring bankruptcy, or committing crimes that become part of your records. All monitoring services will send you an alert when they detect a change to your credit profile. Only you can determine if that change was one you initiated or not. The assumption is if you didn't do it, you may be a victim of identity theft.

There are a couple of other drawbacks to credit monitoring. The first is it does not monitor other types of accounts for potential fraudulent activity. For example, it does not monitor your checking account. Many forms of identity theft go undetected (see my related posting on Lifelock). The other drawback is if you believe there is misuse of your personal information, all of the services provided by credit bureaus make you fix this yourself. Although many offer assistance ---this really translates to "do it yourself". The other issue is that it reports changes to your credit profile as opposed to being an early detection tool of identity theft.

So while credit monitoring is not perfect, it is one of the most prevalent tools consumers use today to protect themselves from ID theft.

You might ask, are there better tools on the horizon? Stay tuned for my next post on Identity monitoring.