Credit Reports

September 2005
by Ann Forstie

Like all taxpayers, family child care providers will be entitled to receive up to three free credit reports every year. This is the result of the Fair and Accurate Credit Transactions (FACT) Act, which affects all consumers in America.

Under the FACT Act, everyone is entitled to request one free credit report from each of the three major credit reporting companies — Experian, Equifax, and TransUnion — during any 12-month period. You can request all three credit reports at once, space them out throughout the year, or request them only when you need them.

Before the FACT Act, consumers were required to pay for these reports, which contain information about your credit history like credit cards, loans, and late payments. It also includes information about other companies' inquiries into your credit history. This report does not include your credit score, which is a number that's the result of a special equation designed to determine your credit qualifications. Your credit score is used to determine your ability to repay debt and also to calculate the annual percentage rate (APR) for loans and credit cards. Your credit score affects your ability to get loans for home improvements, new cars, or new homes, as well as the interest rate on these loans. You can request your credit score for a fee.

A bad credit score may affect your interest rates and your ability to obtain a loan. A good credit score will insure that you pay less for things like home improvement loans, car loans, and buying a new home. There are many ways to improve your credit score. Perhaps most importantly, pay your bills on time. Late payments indicate that you're an unreliable borrower and can make companies think that you might not be able to pay back your entire debt. To help you establish a good credit score, make sure to borrow money that you can easily repay; this shows that you aren't living beyond your means. (Tom Copeland suggests that you try to pay for everything up front except a house and a college education.)

For more information or to request your free credit report online, visit www.annualcreditreport.com. You can also request your report via phone, by calling 877-322-8228, or through the mail at the following address:

Annual Credit Report Request Service

P.O. Box 105281

Atlanta, GA 30348-5281