Aging medical bills that fell off the radar screen, unused bank accounts that were never closed and continue to rack up monthly fees, or an erroneous charge placed on the report by mistake all can wreak havoc on consumers' plans.
Beginning in March, however, a law signed by President Bush in December 2003 will make it easier for Indiana residents to keep closer tabs on those credit reports and head off troubles at the pass.
The Fair and Accurate Credit Transactions Act of 2003-or FACT as it is better known-allows consumers to request one free credit report per year from each of the three major credit reporting bureaus: Equifax, Experian and TransUnion.
This can be done by contacting each of the bureaus individually via a letter or phone call, or by visiting annualcreditreport.com, where all three can be accessed at no charge through an encrypted Internet site beginning in March.
The reports can be ordered all at once, but the bureaus suggest staggering reports every four months to better keep tabs on the most recent postings. Consumers are cautioned to be mindful that not all creditors report to the same agencies.
Previously, consumers were entitled to a free report only if rejected for a loan or credit. Otherwise, reports can cost as much as $9 each.
Credit bureaus advise consumers to use the Web site to get their free reports starting in March.
"Rather than waiting for 15 days to receive [reports] from us, you will be able to go on-line at home at 8 o'clock, access them instantly through an encrypted connection, print them out or download them into a [Microsoft] Word document, and save them on your computer hard drive," said Donald Girard, a spokesman for Costa Mesa, Calif.-based Experian. "As an industry, [the reporting companies] have always suggested that consumers pay attention to what is on their reports."
Girard said that with 215 million consumer files in its database, and "millions and millions" of updates being made each day, it isn't inconceivable that mistakes will occur.
Those mistakes can surface when con- sumers are in the market for mortgages, home-equity loans, car loans and credit cards. And insurance rates are often determined through credit scores.
"It's very important that [consumers] check their credit reports because it reflects your current debt balance outstanding, as well as your financial behavior," said Elaine Bedel, a certified financial planner and owner of locally based Bedel Financial Consulting. "If there has been any sort of miscommunication between a creditor and the bureaus, it needs to be cleared up as soon as possible."
Loans and credit applications often are denied based on faulty credit reports, Bedel said.
"When you're applying for a loan, those reports tell the institution you're applying to just how creditworthy you are," she said. "If the reports show any skipped or missed payments, there could be a problem."
Consumers who find faulty information on their reports often can clear it up by writing credit bureaus and providing evidence of the mistakes.
Not only is having a clean report important when applying for a loan, but it could come into play when seeking a job, Bedel said.
Many financial institutions and companies, including her own, include creditreport checks in the applicant-screening process.
"Because we handle some large financial transactions, we don't want to hire someone with dire financial needs," Bedel said. "Not that there aren't already plenty of safeguards in place to protect against any kind of theft, but we don't want any opportunities for something like that to occur."
It pays to check credit reports after moving from a rented apartment or home, Bedel said.
"They may say you owe 'X' dollars, while you contend that you don't owe them anything," she said. "If that dispute is reported to the bureaus, even after it has been resolved to your satisfaction, it could hurt your credit. If something like that has happened, you need to make sure you address it as quickly as possible."
Errors in reporting between financial institutions and bureaus may mean accounts that have been inactive for some time show remaining balances or delinquencies.
This also could be the case if consumers failed to take the proper steps to close checking or savings accounts.
"Without a question, consumers should go in at least once a year and check on their credit standing," said Jim Brocklehurst, Indianapolis-based senior vice president and retail marketing manager for JPMorgan Chase & Co., formerly Bank One. "Things could be ticking away on there and bringing down your credit score if you're not careful."
Although the credit bureaus must offer one free annual report, it might be prudent to check with the three reporting companies more than once a year, Girard said, to catch identity theft.
"You don't want to give an identity thief a month or two head start," said Experian's Girard, whose company on Dec. 1 introduced Triple Alert, a consumer product that monitors activity of all three credit reports.
For $4.95 a month, consumers are notified by e-mail and text messaging on their mobile phones when there have been any inquiries or postings on the reports.
"If we alert you and tell you that American Express checked your credit report at 2 p.m. today, and you know that you didn't apply for an American Express card, then you know you should check into it right away," Girard said. "If you don't check your report regularly, it could be some time before you discover this is going on."
Girard cautioned against e-mail "phishers" and other scam artists sending out bogus e-mails and letters offering free credit reports in exchange for vital information such as Social Security and financial account numbers.
Annualcreditreport.comis the only portal approved by the federal government for ordering credit reports online, Girard said.
"None of the [credit reporting companies] do any kind of outbound marketing," Girard said. "You have to come to us to request a report. If someone comes to you with an offer, even if it has our logo on it, it's a scam."