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U.S. Consumers Get Free Credit Reports Annually

By Faye Mergel
Published: Tuesday, February 16th, 2010

Consumers from the United States will be happy to know that they are entitled to a free credit report annually courtesy of the U.S. government. This is part of the regulations included in the Fair Credit Reporting Act or FCRA.

U.S. Consumers Get Free Credit Reports AnnuallyA credit report is an important document for American consumers because it helps them keep track of their finances and understand their credit scores. Most consumers know very well the impact that their credit scores can make in their financial lives.

A consumer’s credit score is basically a three digit number which measures how reliable a consumer is in paying off his or her loans and avoiding defaulting on said loans. A consumer’s credit score can vary within a certain range, 350 being the lowest possible score and 850 the highest. The higher a credit score the consumer carries, the better for him or her.

Credit scores are basically distilled from a consumer’s credit report. A consumer’s credit report keeps track of his or her financial history which includes the consumer’s available credit, payment history, how long he or she has had a particular credit line, the types of credit that he or she carries and new credit lines he or she has. While credit card companies can use a consumer’s credit report to determine how well of a borrower a consumer is, they most often use the formula generated credit scores instead.

By far, the most popular credit scores around are FICO credit scores. FICO credit scores are generated by the Fair Isaac Corporation. To generate the FICO credit score, the company processes the credit report of a consumer, applying a complicated formula to it. The FICO credit score takes into account several details in a consumer’s credit report such as the accounts that the consumer paid as agreed, the number of delinquent payments, the negative collections of the consumer, the amount he or she owes on his or her different accounts and the accounts of the consumer that carry zero balances.

Credit card companies and lenders use credit scores to determine whether they are going to approve a consumer’s credit or loan approval or not. A consumer’s credit score also determines the terms that a consumer gets with his or her loan or credit. Usually, higher credit scores mean higher available credit or bigger loans and more affordable interest rates.

Considering the importance of credit scores, it is very fortunate therefore that the FCRA makes sure that consumers can get a free credit report annually from the government. With easy and free access to their credit reports, U.S. consumers can review the details contained within and find erroneous data which may be negatively affecting their credit scores.

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