Personal Finance Trends: Credit Reports: Are You One of the 25 Percent?

Are you among the group of approximately 25 percent of Americans who have an error on their credit report that could affect their credit score? Perhaps you are part of the 5 percent of consumers with an error that could result in paying more for auto loans and insurance.

These are just two of the findings from the Federal Trade Commission's (FTC) fifth national study on the accuracy and completeness of consumer credit reports.

The FTC study, which included a full report to Congress, also revealed that:

  • More than 20 percent of participants were successful in getting at least one credit reporting agency to correct an error on their credit report.
  • Approximately 80 percent of the consumers who filed disputes experienced some modification to their credit report, and approximately 10 percent of these consumers experienced positive changes to their credit scores.

This information should underscore that it is vitally important you check your credit report regularly to ensure it is accurate. Doing so is an easy process.

Beware the "Obtain your credit report for FREE" claims
Some slick advertising out there has caused confusion about the correct website to visit to obtain free reports. The correct website to use for getting your credit reports is This website is the only one that the FTC authorizes to fill orders for the free annual credit report you are entitled to under law. On this site, you can request a credit report once every 12 months from each of the nationwide consumer credit reporting companies.

To access your report from this website, you must provide some personal identifying information, including your name, address, Social Security number, and date of birth. Since you will receive a total of three credit reports (one from each of the credit reporting companies), you can order all at the same time or you can request these various reports at different times throughout the year. If your goal is to complete a comprehensive review of your credit record, you may want to pull all the credit reports at the same time. But if you want to conduct ongoing monitoring of your reports, you may want to view a single credit report every four months. If you decide that you want to have additional reports from the same agency during the 12-month period, you are able to do so for a fee.

Be aware that the credit report does not include credit scores. You must purchase your credit score separately. The score will differ by credit reporting company.

Why are credit reports important for high school students?
As students graduate high school and college, they may be hoping for that big break in landing a dream job. However, that dream job could be hampered if potential employers run a credit check and find negative information. And that negative information could be there through no fault of the students.

Approximately 7 percent of U.S. households have at least one member (aged 12 or older) who have experienced one or more types of identity theft victimization, according to the Bureau of Justice Statistics' Identity Theft Report by Households portion of the 2010 National Crime Victimization Survey. Additionally, a Carnegie Mellon University CyLab survey found that child identity theft rates are significantly higher than those of adults. Among the reasons that individuals who are under 18 are often more susceptible to identity theft is that they are less likely to check their credit reports for accuracy. ID Analytics found that most fraud connected to child identity theft occurred in the credit card and cell phones industries.

One method for detecting misuse of personal information is by pulling credit reports. According to Experian, credit reports are not generated based on age. However, credit reports can be requested as early as age 14 by either the individual or the parent or legal guardian (with documentation proving relationship). Experian indicates that the credit history of minors (individuals under 18) is not available for access by creditors, but becomes available for access when the individual turns 18.

The Identity Theft Resource Center indicates that others often use a child's identity for personal gain because there is generally a significant period of time between when the identity theft occurs and when it is discovered. Generally, family members and the child usually uncover the identity theft when opening savings accounts or getting a driver's license. Then they  learn that the social security number is already associated with another individual.

Teaching about credit reports
In the classroom, teachers should certainly advise students about the importance of checking credit reports and about the risks of identity theft, but they should use caution in actually having students pull reports as part of an in-class assignment since these reports contain sensitive information. Additionally, teachers should be aware that pulling the reports could bring to light uncomfortable situations. For example, a personal finance teacher from Murfreesboro, Tennessee, was faced with the situation of an 18-year-old senior who pulled her credit report to discover that her mother had used her social security number to open some credit cards. The teacher knew she needed to remove herself from the situation and advised the student to talk with the father (the parents were divorced). The teacher said, "It's unfortunate, but identity theft often occurs within families. We definitely need to teach young people about how to pull their credit reports and protect their financial futures."

Federal Reserve and FTC resources
Some of the Federal Reserve Banks and other organizations offer resources for teaching about credit reports and other important issues related to credit.

"All about Credit". The third unit of It's Your Paycheck!, from the St. Louis Fed, focuses on credit topics. Lesson 6 (Credit Reports—and You Thought Your Credit Report Was Important) and Lesson 7 (Creditors' Criteria and Borrowers' Rights and Responsibilities) relate directly to the concepts of credit reports and borrower responsibilities covered in this article.

Katrina's Classroom: Financial Lessons from a Hurricane. A free DVD-based curriculum developed at the Atlanta Fed to teach middle and high school students and their parents the importance of being financially prepared, especially in times of crisis. Lesson 3 and the video "A Fresh Start" explore the importance of the wise use of credit.

"Take Control of Debt: Are You Credit Worthy? Check Your Credit Report." Lesson 11 of Building Wealth in the Classroom from the Dallas Fed explores the "three Cs of credit" as well as the difference between credit reports and scores. Available also as a SMART Board lesson.

"Credit: Friend or Foe?" Lesson 2 of the Money Principles lessons in the Money Circle curriculum from the Federal Reserve System evaluates the consequences of spending and credit use, as well as factors involve with creditworthiness. jingles. The FTCC uses catchy jingles to help consumers remember the only website authorized fill orders for the free annual credit report you are entitled to under law. The site includes a variety of other games and resources related to identity theft, Internet safety, and scams.

"It Pays to Understand Your Credit Report." This blog post from the FTC includes a short animated video on obtaining your credit report.

Related links

By Jackie Morgan, senior economic and financial education specialist, Nashville Branch of the Federal Reserve Bank of Atlanta
March 1, 2013