Credit

Why Aren’t We Claiming Our Free Credit Reports?

Photo: amboo who?

Since the beginning of 2004 Americans have had the right to claim their credit reports from each of the credit reporting agencies once every twelve months, for free.  We were conferred this right by FACTA, which is the Fair and Accurate Credit Transactions Act of 2003.  The methods (web, mail, phone) for claiming our free credit reports can be found at the website http://www.annualcreditreport.com/.

Have you ever claimed your free credit reports?

According to the Consumer Data Industry Association (CDIA), the trade organization of the credit reporting agencies, some 175 million free credit reports have been claimed since the beginning of 2004 through the end of 2010, an average of 25 million per year.  At first glance that sounds like a huge number but when you break it down you quickly realize that it’s just a small percentage of how many could have been claimed.  Follow my math:

There are three recognized national credit reporting agencies; Equifax, Experian and TransUnion.  Each of those credit reporting agencies house well over 200 million consumer credit files.  That means collectively they hold at least 600 million credit files.  That means that there are at least 600 million credit files that can be claimed every 12 months.

The FACTA free credit report requirement has been in place for seven years now.  So that means 4.2 billion credit reports could have been claimed for free since the law took effect.  175 million is 4.16% of 4.2 billion.  An easier way to figure out the percentage is to divide 25 million (the annual free haul) by 600 million. 

The actual percentage is likely lower than for a variety of reasons. 4.16% assumes the Big 3 bureaus house exactly 200 million credit files.  We know the number is actually much higher, but the bureaus won’t disclose the exact number.  And, there’s a fourth credit bureau called Innovis Data Solutions and we aren’t even counting their volume, which is smaller than that of the Big 3 but still very meaningful. 

Point being, we’re simply not taking advantage of our free credit report rights.

That meager percentage is dreadful considering how important your credit is to getting a loan, insurance or a job.  The question is, why aren’t we claiming our freebies?  Here are some thoughts:

Consumer Apathy

Do we not care?  Or is it that we don’t care until we’ve been denied a loan or a job because of our credit?  It seems to be on our New Year’s Resolution list every single year: improve our credit.  Unfortunately, like “lose 20 pounds,” that resolution seems to be forgotten by the time we hit February.

Fear of What’s There

Do you not want to know?  “I believe some people just can’t bear to look at their credit reports because they know they’ve screwed up,” says Linda Sherry, Director of National Priorities for Consumer Action, a consumer advocacy nonprofit organization.  Her hypothesis makes perfect sense.        

Consumers Don’t Know Their Rights

In 2004, the media was all over the coast-to-coast implementation of the free credit report rule.  California and other West coast states were given the right first and throughout the year the free report right moved East.  During that year it seemed as if annualcreditreport.com was written about almost daily. Unfortunately the coverage has all but died save a few mentions here and there.

Confusion Caused by Aggressive Marketing of “Free” Credit Reports and Scores

If you own a television then you’ve seen the advertising for free credit reports and scores.  Squirrels, Ben Stein, and really bad bands… yeah, I guess I can see how all of that relates to credit.  All of these companies blanket the airways and Internet with advertising for free credit reports and score: FREEcreditreport.com, FREEcreditscore.com, FREETripleScore.com, FREEscore.com… none of these are actually free but they ALL have the word “free” in their domains and advertising.  And ironically, the one legitimate website for claiming your free annual credit reports does NOT have the word “free” in the domain. 

Don’t get me wrong.  This isn’t the credit bureaus’ fault.  It’s not their job to stick a free credit report in your back pocket when you’re not looking.  The law requires them to be reactive, not proactive.  It’s up to us to ask for our reports and we’re simply not doing a good job of it.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit.