Hidden Costs Of Free Credit Reports & How To Avoid Them

Posted by Jim M. Davies

January 30, 2009

by Jim M. Davies

Nowadays it seems that every channel you tune into, there’s a commercial for a different company offering you a free credit report. I don’t know about you, but most of the time, when a for-profit company is advertising something, it’s because there’s a sale attached to it. There’s no way the bean counters at any well-run company will keep green-lighting an advertising campaign if said campaign is not turning a profit. And why do all those companies act like they’re looking out for our best interests by offering us a free credit report? What’s in it for them?

Where does the truth lie (I know, wrong choice of words) when it comes to those free offers. It’s true that with all the publicity that has been given to scams of all nature, people have grown increasingly wary of free offers. Yet if the ads keep airing it’s because some people are still biting. Which begs the question: which of these offers (if any) are really free?

The short version of the answers to these questions would simply be “No, they are typically not free”, and “Yes, they mostly come with strings attached”. If you’re the type of person who like more detailed answers, then feel free to read on. A more detailed answer would be that just about any offer you see advertised on TV is NOT free, and so are most of the offers you see online. There are free offers, though, and we can help you sort out the free variety from the paid variety.

Most of the free credit report offers do cost money. Most of them, even the ones that are sent out by major banks and lending firms, are really subscription services that let you view your credit report when you want to. Those services are offered directly by the lending companies, or indirectly by one or more of the three major credit bureaus. Experian, Equifax and Transunion are the “big three” credit reporting firms, and because of their clout the other credit bureaus have become largely irrelevant.

Another reason for the rise in free credit report offers is that people have been getting more concerned about the content of their credit reports, because of the rise of “identity theft”. Consequently, a lot of companies have entered the so-called “identity protection business”. Their business model is simple: they advertise a free credit report, but in the fine print of their offer, should you accept it, it says that you’re agreeing to subscribe to their credit monitoring services. They typically charge from $6.95 to $19.95 a month, and upon sign up you enroll for a plan that lasts anywhere from 3 months to a year. For your money, you get alerted in the case of suspicious activity on your account, and get notified about credit inquiries and late payments.

With the enactment of the Fair Credit Reporting Act (FCRA), the “big three” credit bureaus are each required by law to offer their customers a free credit report every year. They’re not required to send it to you, though, so you have to actually ask for it. You can do so by mail, by phone, or over the Internet. Be sure you follow the instructions so you can get your free credit report, the one where you really don’t have to pay a dime.

Here are some of the circumstances where a free credit report is legally available to you. 1) When a company denies your credit, insurance or employment application based on information that was in your credit report - you have 60 days from the occurrence to file your request. 2) You’re unemployed and are planning to look for a job within 60 days. 3) You’re on welfare. 4) Your believe your credit report contains errors and wish to review it.

When it comes to competition, few industries push it to the level that banks do. Keeping current customers from going to the competitor and/or bringing them in from the competition requires ever-improving offers. That has prompted many banks to offer stripped-down versions of credit monitoring services as part of their services, as a reward for doing business with them. The terms vary but usually all you have to do is get approved for their credit card or open some type of account with them and you’re good to go. Similarly, the companies that serve the high-end market (like, for example, American Express) also strive to offer their customers a complete suite of financial services, which almost always includes credit report access and monitoring.

If your needs do not go beyond looking at your credit report a couple of times a year to check for erroneous reports and misuse of your accounts or identity, there’s no need to pay a monthly fee for that. Even if you do want to monitor your credit report on an ongoing basis, before you go to a paid service, set up your free reports so that you receive one every four months. If that’s still not enough for you, then you can investigate one of the banks or credit card issuers that offers the service as part of a package deal.

The information in your credit report affects not only your credit eligibility, but also your insurance coverage and terms, as well as your employment prospects, you absolutely must keep a watchful eye on your credit report. Anything that shows wrong and is erroneous should be dealt with swiftly. And you really have no excuse since the many options that have been outlined here prove that you can really get your credit report for free.

About the Author:

We strongly suggest that people get a free no money credit report, instead of having to pay for the service. For more of the same type of money-saving advice, visit our personal finance blog.

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Hidden Costs Of Free Credit Reports & How To Avoid Them

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