This is no paranoid fantasy of an imagination running riot. As per the Fair Credit Reporting Act (FCRA) enforced by U.S.A's Federal Trade Commission, each of the three consumer reporting companies that operate across the country must provide a free credit report once a year on demand. If you never heard of one, that is bad news, buddy! A free credit report is your portrait painted in the colors of your credit-worthiness.

It describes who you are, where you live, how you spend, whether you pay your bills on time…. It doesn't stop there – it also goes on to explain at length any interesting history you may have, like some minor trouble with the law, a recent bankruptcy and how many people are suing you for different reasons! Before you sue us for libel, let us assure you that we exaggerated by a mile. Think of a free credit report as a summary bio data of your financial alter-ego. It is an extremely important document and serves many purposes.

Why do you need a credit report? For a variety of reasons. Say you plan to take a loan, purchase an insurance policy or buy a large property. In all these cases, the people you are dealing with will need to satisfy themselves that you are a good credit risk, and not someone who will disappear overnight once the deal is through. You can be sure they will not be dishing out the stuff before having laid eyes on your credit report. Likewise, if you want to employ a senior manager at a large annual salary, a free credit report will serve as a reliable reference check. While is the legally mandated website for processing requests for a free credit report, other sites also provide similar services.

If you do have some unpleasant information on your report, well, there's nothing you can really do about it, unless you are prepared to wait a long, long time. Most negative information can be retained for a period of seven years, and bankruptcy related information until ten. However, there is no time limit for details of criminal lawsuits.

You must ask each of the three nationwide consumer reporting companies for your free credit report once in 12 months. While it's up to you to decide when you will ask for your free credit report, it is a good idea to stagger them, so that you can track progress on a regular basis through a 12 month period. Getting one is simple – ask for it online, or use the phone. Depending on the mode of choice, you will receive your free credit report instantly or within a fortnight.

Not only does your free credit report come in handy under the circumstances described earlier, you can also find out if you are the victim of any fraudulent transactions conducted in your name – on your credit card, for example.

In the event that you do find something amiss on your statement, bring it to the notice of the consumer reporting company the sent it to you as well as the organization that was responsible for sending the information in the first place. If there has been a mistake, it is the responsibility of the two agencies to report the result of their investigation and make necessary amendments to your free credit report.