By Bob Sullivan Technology correspondent
msnbc.com
updated 8/31/2005 1:25:55 PM ET 2005-08-31T17:25:55

Thursday is free-credit-reports-for-everyone day.

Major Market Indices

Beginning Sept. 1, all U.S. adults will be able to request one free copy of their credit report from each of the nation's three credit bureaus.  Consumers were granted the free reports as part of the Fair and Accurate Transaction Act, passed by Congress in December 2003.

The site consumers visit to obtain their free report, AnnualCreditReport.com, went live back on Dec. 1, but the credit bureaus engaged in a rolling release of the reports from West to East -- the Northeast region was the last in line.  So on Thursday, New Yorkers, Washingtonians, Bostonians, and others in the Northeast get their first crack at the Web site. 

Consumers can also call a toll-free number, 1-877-322-8228, to get their report, or they can send for it via snail mail.

The Web site is operated by the three credit bureaus -- Equifax, Experian and Trans Union -- which haven't released data on how many consumers have visited the site.  Last December, there were temporary outages at AnnualCreditReport.com, but since then, thing have run fairly smoothly, said Peggy Tui, who monitors the site for the Federal Trade Commission.

"There have been some glitches, but we think all in all it's gone fairly well," Tui said.  "Sept. 1 will be an important test."

FreeCreditReport.com settlement
Probably the biggest glitch has been the site's name.  While there's only one place for consumers to get their Congressionally-mandated free credit report -- AnnualCreditReport.com -- there are over 100 Web sites with similar-sounding names. Most attempt to sell consumers subscription services that offer repeated peeks at their credit report.

In August, Experian settled charges with the Federal Trade Commission that it misled consumers with its FreeCreditReport.com site, which sells credit monitoring services.  While the firm admitted no wrongdoing, it agreed to refund some consumers and pay a $950,000 fine. The settlement also included Experian's similar Web site, ConsumerInfo.com.

Norma Garcia, a spokeswoman for Consumers Union, said the three credit bureaus who sell reports may have confused consumers by offering services with similar names, hampering efforts to get attention for AnnualCreditReport.com

"The bureaus have done a good job of capturing consumers wandering around trying to find their free credit report," she said. "But they ...haven't done a good job of educating consumers."

Another glitch in free credit report system: In a year dominated by news of privacy data leaks -- the Identity Theft Resource Center says there have been 100 publicly disclosed breeches --  consumers don't seem to know much about AnnualCreditReport.com, or don't think it provides much help.

In a recent survey, Gartner Inc.'s Avivah Litan found that about half those polled either weren’t aware they were entitled to a free credit report or considered them “not effective” in fighting ID theft.

Only 13 percent of those surveyed who had heard of the reports described them as "very effective."

"The free credit report thing is basically a farce. It only tells you very specific information about your situation at a point in time," Litan said.

Mari Frank, a lawyer who frequently represents ID theft victims, said she wasn't surprised that free credit reports ranked low in consumers' minds.

"They are not really a prevention tool," she said. "It just allows you to see and question whether something is either in error or fraudulent (after the fact).  It's not going to prevent ID theft."

Not the whole story?
Still others have criticized the reports because they don't necessarily match the information the credit bureaus share with lenders when a consumer applies for a loan. Lenders can ask for all credit accounts tied to a Social Security number, for example -- consumers cannot.  So if someone else applies for credit using your number, a lender may know about that, but you never will.

In a report filed to Congress by the Federal Trade Commission in December 2004, the agency found that about 4 percent of the time, credit report inquires at one bureau matched more than one file -- the bureau provided these secondary reports to lenders on request, but would not provide them to consumers.

The FTC report does not identify the bureau.

The credit bureaus sometimes refer to these secondary files as sub-files. All three credit bureaus sell specialized services with names like "Social Search," that track the entire history of a Social Security number. The services are not available to consumers.

Still, Linda Foley, who runs the Identity Theft Resource Center, says it's a good idea for consumers to take advantage of the free reports.

"It is like an annual physical," Foley said.  She recommended staggering requests for reports from each bureau -- for example, getting one from Experian this month, one from Trans Union in four months, and another from Equifax four months later. Because the reports tend to be similar, staggering the requests will give consumers a pretty good idea about their credit history and the possibility they've been hit with identity theft.

And not a credit score
But there is a critical piece of information consumers won't see on their credit reports  -- their credit score, which is the three-digit number most lenders use to determine if they'll give out a loan, and how much interest they'll charge. In many ways, the credit score is more important than the credit report.

And that still costs money. In fact, the bureaus advertise paid credit scores on their free credit report Web site.

"Many people don't understand a free report doesn't mean a free score," said Liz Weston, author of "Your Credit Score."

Weston said the free credit report site is a mixed bag; it has raised consumer awareness about credit reports to new heights, but it has led to some people paying for services they don't necessarily need, like credit monitoring.

Tui, from the Federal Trade Commission, says it's really too early to tell if the annual free credit report system is a success or not. 

"The key will be not so much the roll out as the longer term, how it goes for consumers long term, whether the system settles down and is easy for consumers to use," she said. What's really important is if consumers use the site year after year.  Since a credit report is really just a snapshot of personal finances, consumers need to regularly check to see if there are any delinquent accounts, or any signs of identity theft.  

"Credit reports are a moving target," Tui said.

Bob Sullivan is the author ofYour Evil Twin: Behind the Identity Theft Epidemic.

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