Taking a look

As a result of the 2004 Fair and Accurate Credit Transactions Act, better known as the FACT Act, you have the right to request a free credit report from each of the three major from credit reporting agencies each year. All you have to do is go to www.annualcreditreport.com and follow the directions — and follow the directions—or call 877-322-8228. Note that while your credit report is free, you’ll have to pay a nominal fee for your actual credit score. Be wary of any other source that offers a free credit report — there may be hidden fees.

The credit reporting agencies process hundreds of millions of pieces of data each day, and mistakes are bound to happen. Therefore, it’s a good idea to request your free reports to look for such errors. They might confuse you with someone with a similar name, list accounts that aren’t yours, and so on. It’s easy to correct mistakes by contacting the agency, but first you have to catch those errors. In addition, with identity theft always a concern, it’s good to know that the information contained on your credit report is something you have control over.

You’re also entitled to additional free reports if you’re turned down for credit. In that case you request the report directly from the credit reporting agency that provided negative information about you. The creditor who turned you down has to tell you which reporting company that was, if you ask.

The seven-year view

Your credit report shows the last seven years of your credit history (except for Chapter 7 bankruptcies, which show up for ten years). So if you run into a bad spot with your credit — running up big charges and making late payments—it doesn’t mean your credit is damaged for life. Everyone gets another chance, and the longer it’s been since the “bump in the road,” the less this will negatively impact your score. And there are things you can do all along to boost your score, including paying promptly, reducing the total balance you owe, and not requesting a lot of new credit.