Credit Reports: “Free” can mean “Fee”

There's no such thing as a free lunch, and there's only one source for a free credit report.

Starting this month, many of the advertisements offering free credit reports will have to disclose that they are not the federal government's sole approved free credit report provider, in effect identifying themselves as services that could later charge fees.

The new federal law ushers in a new era of increased identity protection and consumer rights. The Federal Trade Commission now requires any web site or print advertisement that offers free credit reports to disclose that they are not linked to AnnualCreditReport.com, "the ONLY authorized source under federal law."

Many so-called free report services are nothing of the kind. Instead, they enroll people in credit report update programs linked to the three major credit bureaus — TransUnion, Equifax and Experian — with teaser free periods that then convert to monthly charges, reports the Chicago Tribune. Getting information from AnnualCreditReport.com is free and will never convert to monthly charges.

However, going the free credit report route won't keep consumers fully informed of their status, warns John Ulzheimer, president of consumer education at Credit.com, a credit information Web site. He noted that even though the law requires credit bureaus to provide a free report, consumers still must pay for credit scores, except in some special, limited circumstances.

The disclosure only applies to free credit reports, not credit scores," he said. "You can drive the Titanic through that loophole."

While that leaves a major gap in keeping track of all aspects of your personal finances, it's a good start; by Sept. 1, the rules will kick in for radio and television advertising, and one of the avenues commonly used by identity thieves who access credit histories will be effectively curtailed.

Credit.com CEO Adam Levin believes this will see for-profit credit report providers wither away, saving consumers money and making their credit identities less vulnerable.