Now that you have free access to your credit report, what do you do with it?

One free credit report, each year, from each credit reporting agency -- Equifax, Experian and TransUnion -- is among the many provisions of the Fair and Accurate Credit Transactions Act (FACTA), enacted Dec. 4, 2003 to amend the Fair Credit Reporting Act (FCRA).

Beginning Dec. 1, approximately 70 million consumers in the West first gained access to free credit reports online at AnnualCreditReport.com, by phone at (877) 322-8228 or by writing Annual Credit Report Service, P.O.Box 105281, Atlanta, GA 30348-5281.

The rollout, designed to prevent overloading the system, moves to the Midwest on March 1, 2005; to the South on June 1, 2005; and finally to Eastern states and U.S. territories by Sept. 1, 2005.

Consumers have long had access to their credit report and consumer advocates, credit and real estate experts all say consumers should know what's on their credit report. The frequency with which consumers should check their report depends on how credit active they are.

How often?

"I always recommend that you check your credit reports at least once per year though I check mine twice," said Atlanta, GA-based Christine Karpinski, a real estate investor and author of How To Rent Vacation Properties By Owner (Kinney Pollack Press, $26).

"Why? Credit bureaus are notorious for having the wrong information and the worst customer service. If you find an error on your credit report you have a better chance of getting your errors fixed, though not necessarily in a timely manner," said Karpinski.

And the sooner you get started the better.

Karpinski put an offer on a home in 2002, but never went through with the deal, yet the loan showed up on her credit report. She says she's still fighting to get the ding removed.

"So what does it matter? It shows me as a more transient person and lowers my credit score," said Karpinski.

Also, the more active a credit user you are, the more you should check your credit report, especially well before a credit application for a major purchase, including a home mortgage.

"Credit reports should be checked at least once a year, and any discrepancies should be fixed immediately. It is not difficult to do, and the savings can be huge. It is often too late to fix once the loan process is initiated, and the cost in higher interest rates and points can be quite large," said Stefan Walker a real estate agent with Alain Pinel in Los Gatos.

What is a credit report?

Your credit report is a fiscal fitness report on your credit habits and typically names your credit accounts, identifies them by type and tracks balances, credit limits, available credit, open-or-closed status and payments all to reveal how well or how poorly you pay each account.

The report also documents credit requests and notices of liens, judgments and other "derogatory" remarks, remarks from the consumer, and other information.

"If you have an unpaid parking ticket and the city filed a lien for a judgment, tax liens, old medical bills, collections accounts (all impact your credit standing). Every time a collection account is resold to another collection agency, that is reported, and they all can dramatically affect your report," said F. Michael Johnson, a Phoenix, AZ real estate investor and author of Borrow Your Way to Wealth (Acacia Publishing, $11.95).

Your credit report also lists your name, Social Security number, birthdate, and recent places of employment and residence, among other information.

What should you look for?

"The first thing you should do is to make sure it is yours -- 83 percent of all credit reports have some anomaly, some error, large or small. Make sure all the information is yours," said Johnson.

"Second, look to see if the information is outdated. Derogatory information (liens, judgments, slow pays, etc.) can only remain for 7 years, bankruptcies for 10. The information is supposed to be purged but it isn't always," Johnson added.

There's a one-in-four chance your credit report contains an error serious enough to cause you to be denied credit, according to "Mistakes Do Happen: A Look at Errors in Consumer Credit Reports," released earlier this year by public issues watchdog U.S. Public Interest Research Group (USPRIG).

"Do you see any accounts you don't remember opening? Do you see any late payments listed where you know you made the payments on time? Is there any info showing on the report more than once? (You don't want it to seem as though your debt to income ratio is worse than it is.) Are there any accounts missing? Do you see anything else you feel is outdated or incorrect?" asked Nancy Castleman with the Elizaville, NY-based Good Advice Press, a consumer self-help company offering living-for-less financial advice.

Castleman says credit reports come with forms consumers can use to address errors, questionable entries, duplications, outdated information and other data. Complete the form as required or write a letter explaining your dispute. Keep your emotions in check and have someone edit your letter before sending it.

How do you dispute errors?

"Include copies of any documentation that backs up your version of the story. Your letter disputing information should be clear, to the point and understandable. You may be tempted to blast the bureau for having wrong information, but that's not the best way to go. Stick to the facts and consider asking a friend or relative to review your letter before you send it," Castleman advised.

The bureaus have 30 days to address your concern and they do not have to remove the item until they've found it to be erroneous.

You can help speed things up by taking your complaint directly to the offending creditor or other party -- something you may have to do anyway if the creditor disputes your story.

"Once you've resolved the dispute, ask the lender to send a correction to the credit bureau," said Castleman.

Karpinski says to also look for any zero-balance accounts which still have an "open" or "active" status. Any account, even one with an unused credit limit, affects your credit standing. Some accounts with an unused credit limit can adversely affect your standing depending upon what else is on your record.

Close all open but unused credit accounts by sending a written request to the creditor. The letter should also include a request that once the account is closed the creditor must notify the credit bureaus. When you receive your own confirmation that the account is closed, send a copy to each credit bureau, Karpinski says.

"When you close the accounts and get documentation from the credit company keep it in a file forever," she says.

Keep in mind, you must take all these steps with all three credit reporting agencies.

Once any errors or changes have been corrected, request a new copy of your credit reports to make sure the correction has been posted.

Then it's time to improve your credit report by upping your so-called "credit score."

But that's another story.

Published: December 17, 2004

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.