You may have read about the new study from the Federal Trade Commission on the accuracy of credit reports and the ability of consumers to get inaccurate information removed from theirs.
The other morning I was listening to an FTC official on CSPAN's call-in program explaining the study and taking calls from listeners. In the course of the program, several times, the FTC expert advised listeners of the value of obtaining copies of their credit reports as a way of guarding against identity theft. He mentioned that since you are allowed only one free report a year from each of the three major credit bureaus, many consumers stagger their requests so that they might get a copy of their report from TransUnion® in February, from Equifax® in June and from Experian® in October. This way, they believe, they will catch any changes that might occur during the year.
I also have blogged about the value of obtaining your credit report as a means of guarding against identity theft, and I cover the subject in depth in my book, Bankrupt at Birth. But in the face of the constant advice that is given out about obtaining your credit report as a way of discovering if your identity has been stolen, another look at the subject is certainly in order.
We tend to think of the credit reporting agencies as approaching omnipotent. Most people believe that all of the credit in our names, including how we have paid it off, will be contained in our credit reports. Therefore, if someone is using our name it should immediately show up.
Surprisingly, many transactions never show up in our credit reports. Rent an apartment, get a phone installed along with electric and gas, and likely none of these transactions will be reported to any of the three credit reporting organizations. Likewise, obtain a cell phone and most likely no record will reach the three.
Yet experience shows that these are among the main reasons that identities are stolen or, put another way, the main uses of stolen identities.
Often credit granters request copies of an applicant's credit report, issue credit, but never report transactions to the credit reporting companies, so just the request is not reflected in the report you are sent. Then there is the question of time lag. It can be weeks or even months between the time a record comes into the credit bureau and finds its way to a specific consumer's file.
Or, heaven forbid, one day you get stopped for a minor traffic violation and find yourself in handcuffs because of an outstanding arrest warrant from some place you have never even visited because somebody has used your identity there to duck out of an arrest. But this would not show up on your credit report.
Then there is the advice to space out your requests over the year. This supposes that all three credit reporting agencies will have the same information on you. But different credit granters report transactions to different agencies. Some might report to all three, but not many. Theoretically, the three exchange information among themselves to close this gap, but at any one time there might be — and almost certainly will be — sharp difference between each report.
Then we can get into a discussion of the problems you might face if someone is using your Social Security number but not your name. This can cause you great problems, but likely will not be reflected when you request a copy of your credit report and give your name, address and Social Security number in your request. What you will get is a report containing all three.
This is not to say there is no value in your obtaining a copy of your credit report. But consumers need to understand the limits of the request. A better idea would be to subscribe to one of the monitoring services that use a wide range of sources to detect possible identity theft and who do not simply rely on credit reports.