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Get Your Free Credit Report

Beginning on December 1, 2004, residents of the Western U.S. have the right to order a free copy of their credit report under the Fair and Accurate Credit Transactions Act (FACTA) and the Fair Credit Reporting Act (FCRA). Residents of the final group of East Coast states will be able to request their free credit reports by September 1, 2005

All U.S. consumers will become eligible for free reports on this schedule

FACTA, which was enacted on December 4, 2003, amends the FCRA and requires, among other things, that the three nationwide consumer reporting agencies (CRAs) - Equifax, Experian, and Trans Union - provide to consumers, upon request, a free copy of their credit report once every 12 months. The Federal Trade Commission's final ruling on the issue of providing U.S. citizens with free access to their credit reports at:

You have the right to request one (1) free credit report from each of the three (3) credit reporting agencies each year. Dr. Manning suggests that you request a free credit report EVERY FOUR (4) months on a rotating basis. For example, request your report from Experian on January 1st, Trans Union on May 1st, and Equifax on September 1st. Unfortunately, you must pay for your summary credit score. What a surprise that the fee has been raised from $3 to $7. However, unless you have corrected many factual errors or experienced major changes in your personal finances, the purchase of your credit score once per year should be sufficient for monitoring your credit report. Currently, you can purchase your FICO score directly at as well as examine personal financial attributes that can improve your credit score at the FICO simulator.

After December 1, 2004, you may request your free credit report via the internet at or request the report by phone: Toll-free number: (877) 322-8228.

You may also make your request by writing to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. Requests by phone or mail will be processed within 15 days of receipt.

How is Your Credit Score Calculated?

The most important item in a consumer's financial resumé today is his or her credit score. The one most widely used is the "FICO" (Fair Isaac Corporation) score, the standard measure for credit risk. This score was developed in 1989 as a joint project by Equifax and the Minneapolis-based Fair Isaac Corporation, which provides financial services to the world's 10 largest banks, as well as companies in more than 60 countries.

The scoring system awards points for each factor that can help predict the likelihood of a person repaying debts on time. The total number of points -- the credit score -- predicts how creditworthy a person is. The FICO score, a three-digit number between 300 and 850, is a snapshot of a person's financial standing at a particular point in time. The higher a credit score, the more likely a person is to be approved for loans and receive favorable interest rates.

Click here for chart and more info on credit score calculation

The best credit rates are given to people with scores above 770, but a score of 700 -- out of a possible 850 -- is considered good, according to Fair Isaac. The median score is about 725. Generic interest rate calculations on the Web site show that when the score dips below the mid-600s, those consumers generally qualify only for "subprime" lending and the interest rate starts to climb significantly.

Fair Isaac Corporation does not maintain a database of FICO scores, as many assume. Instead, when a lender requests a credit rating, the score is generated by one of the national credit bureaus from which the lender has requested the report. Fair Isaac provides the credit bureaus with software containing an algorithm -- a mathematical formula derived from random samples of consumers' credit information -- and that is what is used to calculate the score.

Improve Your Credit Score And Develop a Solid Credit History

The first thing to remember is that your credit score can vary from month to month-even day to day, sometimes. This is because it is calculated based on the credit data available for you at the credit bureau on the day the score is requested by a lender.

But there are some specific ways to improve your credit score. First, when a lender receives your credit score, it includes "score reason codes" to explain the top reasons your score was not higher. These codes can give you an idea of how you should start improving your score, such as closing unused credit accounts or being more diligent about making payments on time.

Additionally, here are some general suggestions to help you develop a solid credit history and influence your score for the better:

Pay your bills consistently and on time. And take heart-the scoring models all take into account the fact that everyone misses a payment once in a while. Also, negative information loses its potency over time: a recent late payment is weighted more heavily than a late payment four years ago.

Check your credit report and remove any errors. By making sure that only your accurate credit history appears on your report, you ensure that the credit score it generates isn't lowered by inaccurate information.

Keep your debt reasonable. One rule of thumb: for a good credit score, your account balances should be below 75% of your available credit. For example, if you have a $2000 credit limit, you should have a balance of no more than $1500.

Maintain only a reasonable amount of unused credit. While it's good to have a cushion of credit available, having ready access to thousands of dollars of debt makes you a poorer credit risk.

Avoid too many inquiries. Inquiries are interpreted as a sign that you have been actively seeking credit, and may be in financial difficulties or in the process of overextending yourself.


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