As 2012 draws to a close, it’s important to conduct some year-end financial housekeeping.  Pulling your free credit report could help you avoid some costly financial consequences in the New Year and beyond.

Even though their commercials might be catchy, I don’t recommend any credit reporting websites that require you to pay for a credit report, or enter a credit card number to see your report.  The Fair Credit Reporting Act (FCRA) requires that each of the three main credit reporting companies – Experian, Equifax, and TransUnion – provide you with one free report each year.  If you haven’t taken advantage of this benefit, now is the time to do so.  You can request a free credit report online, at www.annualcreditreport.com or by calling 1-877-322-8228.

Why is it important to check your credit reports?  Credit reports have a significant role in your financial well-being.  Credit reports are checked when you apply for insurance, employment, renting a home, and submit mortgage applications.  Furthermore, checking your credit report frequently is the best way to prevent identity theft.

If your credit report contains an inaccuracy, there is an internal procedure to appeal an error.  The first step is to contact the credit reporting company (Experian, Equifax, and TransUnion) in writing, and clearly identify the disputed items on the report.  It also helps to include copies of documents that support your position.  The credit reporting company is required to investigate the disputed portion of the credit report, usually within 30 days.  The credit reporting company is required to inform the consumer about the results of its investigation.

Finally, if the internal appeal process offers the consumer no relief, the FCRA does provide a private right of action for consumers to sue a credit reporting company for willful or negligent failure to comply with the FCRA.  If the company is deemed to have failed to comply with the FCRA, it will be liable for actual damages, litigation expenses, and reasonable attorney’s fees.