Your credit report is a view into your financial life. Without it, lenders would not know how responsible you are with your money. Consider it a snapshot of your financial life now as well as a look at your history. Lenders can determine your payment patterns by looking at your accounts over the last few years. They can easily determine if you struggle during different times of the year or if you overextend your credit. The problem is your credit report could have errors. You could also have issues you need to resolve. These are just a few reasons you should check your credit report annually.
One Free Report
Everyone can receive one free credit report per year. In fact, you can receive one free report from each credit bureau. Equifax, Experian, and Transunion all provide you with a report, so technically you could get one 3 times per year if you don’t order them all at once. Either way, you can make use of these reports for a variety of reasons.
Legitimacy of the Accounts
Human error occurs even on credit reports. Take the time to go over your report to look for such errors. Common errors include:
- Incorrect figures entered
- Information from someone else’s file
- Inaccurate dates entered
Files get crossed, numbers get fudged, and people make mistakes. It’s just a fact of life. It is up to you to make sure the data on your credit report belongs to you. Checking for the legitimacy of accounts reporting on your credit report helps keep your credit score up. Even one wrong number or one account that does not belong to you could wreck your score for many months without you knowing about it.
Accounts not Reporting
If you use your credit responsibly, you want the credit bureaus to report it. Sometimes, though, you might find that Transunion or Equifax report one account, but Experian doesn’t. They do not communicate, so you should not expect everything to be uniform throughout the reports. If you notice an account not reporting on your credit report, contact the appropriate bureau with the information to get it reported. If you pay your bills on time and do not use too much of your available credit, it can help your credit score.
Check Your Credit Report for Identity Theft
Unfortunately, today, identity theft is a real problem. The internet makes it easy for crooks to steal our information. Sometimes the only way to find out if you were a victim is through your credit report. Wouldn’t you rather know about it sooner rather than later? Some people don’t find out until they apply for a new loan and find out they have bad credit. Don’t look only at the open accounts, but also at the inquiries at the bottom of the report. These show which companies recently pulled your credit because of an application. If you don’t recognize the company, it could be a sign that someone is trying to apply for credit in your name. The quicker you act, the easier the mess is to clean up.
Monitor Co-Signed Accounts
If you were brave enough to co-sign on an account with someone, looking at your credit report can let you know how responsible they have been. This takes the stress away from you as asking someone if they have been making their payments on time can be embarrassing. The account you co-signed on will show up on your credit report too. If the borrower does not make the payments on time, you will know about it right away. You can then decide how you want to proceed. Sometimes it is easier to make arrangements with the creditor rather than facing the person who defaulted on the loan.
Understand the Reasons you Were Denied a Loan
If you recently applied for a loan but did not get it, you should know why. The letter that accompanies the denial should tell you how to obtain your credit report. Even if you already took advantage of your free credit report from each bureau for the year, you are entitled to another one because of the denial. You only have a limited time to order the report, so act quick. When you receive it, look it over to see what accounts made you ineligible for the loan. Again, make sure they are your accounts and the payments are accurately reported. If there are any inaccuracies, make sure you address them right away.
Understand What you Can Change
Lastly, you should always know what your credit looks like so you know what to change. The algorithms the credit bureaus use are very complicated, but there are certain steps that always work to keep your score high:
- Pay your bills on time every month
- Don’t use more than 20% of your available credit at one time
- Pay your credit cards off in full as often as you can
- Don’t close accounts you don’t use, the older the accounts, the better your score
- Watch how many new accounts you open at once, it brings the average age of your accounts down
Just these simple steps can help increase your score in a few short months. Each category makes up a certain percentage of your credit score. You don’t have to worry about that part of the score process, though. Instead, just get into the habit of putting your best financial foot forward. Stay focused on doing things right and your credit score should benefit in the end.
It always pays to be diligent about your scores, though. Make sure you understand what the bureaus report about you and make sure it is accurate. Any inaccuracies could take weeks or even months to clear up. The sooner you start the process, the better of you will be. Your credit affects your life in many areas, but most importantly, when you need a new loan. You don’t want to find out at that time that your credit is suffering. Instead, know ahead of time what you are dealing with so you can make the most of your score.
