So is This "Free" Credit Report Really Free?

You've seen and heard the advertisements, the music plays and the singers tell you to come to "FreeCreditReport.com" and check your credit score. The higher your score, the ads tell you, the more money you could save in future transactions. So is it true? Is it free? And why should you care?

While the consumer was waiting for the website to be established for access to a free annual credit report from each of the three nationwide reporting agencies: Equifax, Experian and Transunion, another website popped up to take advantage of this need and "Free Credit Report" began advertising. So is it free?

Yes and no. It's free for your first report if you sign up for their credit monitoring program. They offer you the first month of this service for free, which you don't actually need since you will receive your report (and be able to check for accuracy) when you sign up. The site also offers you a tri-merged credit report of the three bureaus for only $39.95, or a one-bureau report from Experian for only $14.95. What exactly you would get as a "free report" is not explained on the front page, but must consist of just one of the three reported scores.

It is interesting to note that Free Credit Report does provide a link to the "real" free site, Annual Credit Report, www.annualcreditreport.com. September 18, 2006 marked the first anniversary of the site, as mandated by Congress in the Fair and Accurate Credit Transactions Act of 2003.

The site is helpful and has a page of frequently asked questions, along with the most basic:

"What is a credit score?
A credit score is a complex mathematical model that evaluates many types of information in a credit file. A credit score is used by a lender to help determine whether a person qualifies for a particular credit card, loan, or service. Most credit scores estimate the risk a company incurs by lending a person money or providing them with a service - specifically, the likelihood that the person will make payments on time in the next two to three years. Generally, the higher the score, the less risk the person represents."

So you know your scores-can they really save you money? The answer is a resounding "yes!" In the mortgage industry, interest rates and programs are now offered in relation to an applicant's scores. Other industries are beginning to follow this practice, including auto financing and insurance companies. Scores 620 and up are usually considered acceptable, scores 700 and over are considered excellent.

If you want to improve your scores, here are a few tips:

-Don't allow anyone to check your credit until you have decided on that company as a lender, or are ready to purchase a car, etc. Multiple inquiries can lower your score.

-Make your payments on time! If your mortgage has a grace period and you take advantage of it, make sure you aren't being marked "late" or charged late fees.

-Don't leave too many accounts open at one time, especially ones with high credit limits. Having a good deal of available credit (which you could charge up all at one time) can lower your score.

-Don't co-sign for loans for friends or relatives. If they are late, it will show up on your report as well as theirs.

-If you open a revolving credit card account to help build your payment history, be sure to actually make a few of the monthly payments in a timely manner. If you pay the entire balance the first month you will save the interest payment, but not build your score.

-If you open accounts at some small banks, ask if they report to the credit bureaus. Many do not report payment histories, so accounts at these institutions can't help build your score.

With a bit of work consumers can raise their scores and save money, without paying anyone for the service.