How to Keep Tabs on Your Credit Report

Curious about your credit score?

If you are, "Early Show" Financial Advisor Ray Martin recommends caution when you're searching for a service to provide you with a report. Martin shared these credit report tips on "The Early Show":

Flogging Free Credit Reports No More
If you spend any time watching TV, you've probably heard a trio of guys singing about their credit woes and how their problems could have been avoided if only they had gotten FREE credit reports from a certain website.

While the singers were amusing, the company that sponsored them wound up getting in hot water with the Federal Trade Commission. The FTC charged that the company was misleading consumers who were seeking free credit reports. Instead, when folks contacted the website to receive their credit reports, they were automatically enrolled in a credit monitoring service for which they would be charged a monthly fee.

More on Credit Reports at Moneywatch.com

In order to protect consumers from misleading offers like this, the government's new law -- The CARD ACT -- includes rules addressing disclosures about credit reports, which became effective April 2. Now companies are required to include a prominent notice across the top of each webpage that mentions free reports declaring that the only authorized source for truly free credit reports is the website AnnualCreditReport.com, which is the only site authorized by federal law to do so.

Hopefully, this will help people realize that the "free" reports they're signing up for on these other sites likely have some expensive strings attached.

Sounds good, but here's the catch: Companies of course want to avoid sending potential customers to AnnualCreditReport.com. So now, some companies are switching their tactics in an effort to trick consumers into buying their services. In order to avoid the requirement to post a disclosure on web pages offering "free credit report," some are now charging a token amount -- such as $1 -- for credit reports. Others are now advertising "free" credit SCORES. If you look at the offers closely, you'll see that they are still misleading -- a way to trick you into signing up for credit monitoring or another service.

Here's the bottom line: if you want to obtain a free credit REPORT from TransUnion, Experian and Equifax, you can ONLY do so at AnnualCreditReport.com.

There is no similar site where you can receive a free credit SCORE. Credit reports do not provide you with your credit score -- this is something you have to pay for. Because access to and improving credit scores is vital to helping improve the financial health of many Americans, a group of Senators is introducing legislation that would allow folks to access their credit score when they access their free credit report.

But until this happens, I suggest heading to MyFICO.com where you can buy your FICO score -- the most commonly used credit score -- plus a single credit report for about $16.

Reviewing your credit report is the first step towards improving your credit score because if there is any incorrect or negative information on the report, it can lower your score. If you find mistakes on your reports, you should file a dispute directly with the credit bureau. They have the burden of contacting the creditor and asking them to either remove the error, or prove that the information is correct.

Anyone about to borrow a serious amount of money for an important purchase should find out their credit score. You should also check your credit report three to six months in advance of applying for a loan as it can take several months to correct credit report issues and improve your credit score.

Credit Monitoring Services
The marketing tactics of companies selling credit monitoring services seems to be working in their favor. About 24 million consumers have signed up for these services paying about $60 to $180 per year. The providers of credit monitoring services claim they'll protect folks from ID theft by regularly watching for changes on your credit report and then sending timely alerts when changes are detected. But this may create a false sense of security for many folks. The fact is that some forms of ID theft may not appear on your credit report for a long time, if ever. One reason for this is because of the credit-bureau practice of creating "temporary fragmented files" using account information with your Social Security number, but a different name, address, date of birth, etc. Some consumer advocates warn that credit monitoring services are like an alarm that warns you long after the break-in has occurred.

But it comes as no surprise that ID theft protection services are rapidly growing area of business. ID theft protection services include a range of products from credit monitoring services to ID theft insurance. Credit reporting companies, such as Equifax (Equifax Credit Watch), Experian (Experian Credit Manager) and TransUnion (Credit Monitoring) offer services that monitor a subscribers credit report, sending emails when there are inquiries or changes to the report. The costs of these services include a subscription that includes daily credit report monitoring and sending alerts via email. More often than not, fraud resolution insurance is part of the package. Consumer advocates warn that these services can be costly and incomplete, as many only check activity on one credit bureau report, not all three. They also state that a consumer can do themselves for free what most of these services offer to do for a fee. Of course, I can cut my own lawn, but I might be inclined to pay for the convenience of having someone do it for me. I think that if you are concerned about ID fraud and prevention, then the nominal fees for these services is well worth the cost.

A number of insurance companies offer identity theft insurance. For a typical cost of $25 to $50 per year, these policies provide maximum benefits of $15,000 to $25,000 towards the cost incurred in rehabilitating an identity, such as attorney's fees, lost wages, loan application fees notary, and phone and postage costs. What is not covered are the actual dollars stolen from your account or fraudulent charges on credit cards -- an ID theft victim must sort these issues out with their bank and credit card companies. The biggest limitation is that such insurance will exclude fraud that had occurred before buying the insurance -- given that it can take a long time for ID fraud to become detected, this is a an issue.

Consumer advocates concede that credit monitoring services or insurance could be worth the cost for people who have been a victim of ID theft or who are at higher risk, such an individual who keeps a lot of money in their banking accounts, checks activity infrequently, travels frequently, travels abroad, or those who are not likely to check their own credit reports. Some people may already have ID theft insurance and not know it -- several insurance companies provide it as a standard or additional feature of their homeowner's insurance policies. Some credit card companies also offer it as a part of their cards benefits. So check before you buy.

ID Fraud Self Prevention
Here are a few things you can do to help detect and reduce the potential that your personal and account information is used fraudulently:

• Carefully review all activity on your credit card and bank statements and dispute or report unauthorized activity as soon as it's detected.
• Review your credit reports regularly, looking for changes and any incorrect account information.
• Ask the credit bureaus to place a free fraud alert on your credit report file. You'll need to renew this alert every 90 days and it warns lenders that they should take extra steps to confirm your ID before issuing new credit.
• Put a lock on your credit report file by freezing your credit report. A credit report freeze, which costs about $10 per file, prevents new lenders from accessing your credit report. The catch is that you'll be prevented from opening a new credit account unless you temporarily unfreeze your account.

It is almost impossible to prevent ID theft from happening even if you take every precaution to prevent it, particularly when a business that has your personal information is compromised from within. The single best defense against prolonged damage from ID theft is to frequently review your credit report information for signs of incorrect information and accounts that you did not open. Early detection and immediate action is the only way to stop the damage that can be done when your personal information is fraudulently used. The bottom line: you have to take as much interest in your credit report information as the bad guys do.