Trying to earn and maintain healthy credit without checking your credit reports is like trying to lose weight without ever stepping on the scale.
Your odds of success are much better if you’ll take the time to check your credit reports on a regular basis, not just when you’re about to apply for a loan or you hear about the latest data breach on the news. It’s quick and free, so there’s really no reason you shouldn’t do it as soon as you get done reading this.
Your Free Annual Credit Reports
As an American citizen, you have the right to a free copy of all of your credit reports once every 12 months. You’ve had this right since 2003, when the Fair Credit Reporting Act was amended by an act called “FACTA.”
Although this federally mandated right to free annual credit reports has been around for about 15 years, a staggering number of consumers continue to ignore this option. Several years ago, a representative of the credit industry’s trade association told me, off the record, that only about 4% of free reports are claimed every year through their website, annualcreditreport.com. That means 96% go unclaimed, and they don’t roll over like cell phone minutes. Claim your free credit reports each year, or lose them.
Annual Credit Checks Are Only the Beginning
Your credit reports will change almost constantly over the course of a year. So while checking your three reports once is a year is a great place to start, there’s still a lot of room for surprises.
As a credit savvy consumer, you’re going to want to develop the habit of checking your credit reports every month, hopefully around the same time that you’re combing through your credit card and bank statements. Monthly credit checks will not necessarily protect your credit reports from problems, but they can certainly empower you to act quickly when and if problems arise.
Here are some of the key areas you should review during your monthly credit checks.
Incorrect credit reporting: It’s true that credit reporting errors can and do happen. Unfortunately, mistakes on your credit reports can potentially be a problem where your credit scores are concerned. You should check your credit reports carefully each month for any incorrect information. If you discover a problem, you can the creditor that’s reporting the error and/or dispute the mistake directly with the credit bureaus themselves.
Unauthorized inquiries: One of the first signs that you may be a victim of identity theft is a record of someone applying for credit in your name. Thankfully, your credit reports feature a way to track any time your credit has been accessed. Whenever a lender pulls a copy of your credit report(s), a record of that access, known as a hard inquiry, is added to your report(s). If you discover an unauthorized hard inquiry on your reports, you can take action with disputes, add a fraud alert to your reports, or freeze your credit reports if you’re worried that someone has stolen your personal information.
Fraudulent Accounts: Another indication that your identity may have been stolen is the appearance of unrecognized accounts on your credit reports. According to the Fair Credit Reporting Act (FCRA), you have the right to dispute any incorrect information on your credit reports, including accounts that don’t belong to you. If you’ve been the victim of true-name credit fraud you can file an official Identity Theft Report at IdentityTheft.gov or at your local police department. You can then send that report into the credit bureaus along with your dispute. The FCRA requires that any fraudulent accounts that are properly disputed be blocked from your reports within four business days.
More by John Ulzheimer:
- Problems That Can Haunt Your Credit Forever
- What’s a Good Credit Score?
- Which Bills Affect Your Credit Score, and Which Don’t?
John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. He has written four books on the topic and has been interviewed and quoted thousands of times over the past 10 years. With time spent at Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.