How Often Should You Check Your Credit Report?

It may not be the most exciting thing in the world, but it’s a necessary part of your financial health.

Ever wonder why you can check your credit report for free once per year? Or why the government website that allows those free checks is named AnnualCreditReport.com? Probably because it’s a good rule of thumb to keep tabs on your credit report on an annual basis.

Just as you’d check your bank account or your investment account on a regular basis to see how much money you have, it’s important to check your credit report regularly because it governs whether credit will be available to you — and how much.

The information contained in your credit report is used to calculate your credit score, and that score “can significantly impact your ability to borrow any money, as well as the interest rate you’ll pay,” says Freddie Huynh, vice president of Credit Risk Analytics at Freedom Financial Network in San Francisco, Calif.

Even if you don’t plan to take out a car loan, mortgage loan, credit card or other forms of credit, your score still affects your finances. For instance, the utility company uses credit scores to determine the deposit amounts for new customers and auto insurance companies consider them in determining rates.

“Credit reports and scores can affect the ability to rent an apartment, as many landlords now check applicants’ credit,” Huynh says. “Also, [some] employers are allowed to check credit reports, so credit reports can affect the ability to get a job in some cases.”

How to Check

Three major credit reporting agencies – Experian and TransUnion and Equifax (yes, that Equifax) – provide credit reports. While each agency provides similar information, there are often variations among them.

You can get credit reports from each agency once a year at no charge, at Annual Credit Report.com or by calling 1-877-322-8228. You also may be able to check your report through websites such as CreditKarma.com.

In addition, you may see your credit score noted on your monthly credit card statement or bank statement, which can be an easy way to check for changes. However, keep one thing in mind: “[C]redit scores and credit reports are not the same things,” Huynh says. “Information from credit reports is used to develop credit scores. The score disclosures you may receive from creditors do not include the underlying credit report.”

What’s in that underlying credit report? In short, it’s “a detailed listing of all your debts and payments, going back through your entire payment history, Huynh says. “For each credit account you have, the report can show the creditors’ names, the amount owed, the highest balance owed, available credit, whether the account is open or closed (and who closed it), the number of times a payment was past due and whether the account is in default.”

What to Look For

When you do access your actual credit report, what do you need to look for? Huynh recommends paying attention to these four items:

Identifying information
Make sure your personal information is correct because it can help the credit reporting agency match the right information to your credit report.

Creditor information
This section will list your credit accounts with information about the lender, how much you owe, whether the account is current or past due, whether it is open or closed, and other information regarding the account.

“Review this entire section carefully, ensuring that each account belongs to you and that all information is accurate,” Huynh says. “You may find that some creditors have closed accounts that you have not used in a long time. If any accounts are noted as past due, work to pay them as soon as possible. If you believe there are errors, submit a dispute.”

Collection accounts
If you have any unpaid debt that has been placed with a collection agency, that will also show up on your credit report. Repaying those debts may improve your credit score.

“If you pay the collection account, ask the collection agency to send a letter to you and the credit bureaus stating the debt has been paid,” Huynh recommends. “If a debt is not yours, ask the collection agency to send a letter stating that information to you and to the credit bureau.”

Public records
Any public financial records about you will appear here, such as bankruptcy judgments, liens, or wage garnishments. Review the information for accuracy.

Inquiries
This section of the report lists businesses that have reviewed your credit report. Inquiries that are associated with you applying for credit, such as a mortgage, can be factored into a credit score are those associated with you applying for credit. For example, if you apply for a mortgage or a credit card, your application can impact your credit score.

If you see any inaccuracies in your report, you need to dispute the error. Do this by following the directions on each credit reporting agency’s website.

“Under the Fair Credit Reporting Act, the credit bureaus must investigate any disputed items and correct the information if it cannot be verified,” Huynh explains. “As an example, if you find information on your credit report that is not yours – such as a credit card that you have no knowledge of – that would warrant a dispute.”

When to Check More Often

For most people, an annual check-in on their credit report is plenty. However, in some cases, it’s a good idea to check your credit report more frequently.

For instance, if you’re getting ready to make a large purchase with a loan, such as a mortgage or a car loan, you may want to check your credit in advance to avoid any surprises. Also, if you’re working to improve your credit score, you may want to check more often to make sure there is an upward trend, Huynh says. And if you’ve been the victim of identity theft, you’ll also want to check in more frequently to make sure the damage has been corrected.

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