January is a great time to check your credit report, that all-important report that details your credit history and determines your credit score. Reviewing your credit report is a smart money management task and financial experts recommend that you check it once a year. Here are just a few of the reasons why:
Credit bureaus aren’t perfect. They could have incorrect information. For example, an extra number added to a credit card balance could make it look like you owe a lot more than you do. By carefully examining your credit report you’ll be able to spot inaccuracies and can start taking action to correct them. If you have a dispute, you will need to inform the credit reporting agency in writing, about the mistake. Visit the Federal Trade Commission (FTC) website for details on how to dispute credit report errors.
Spot identity theft
Sometimes you can be a victim of identity theft and not even know it. Check your credit score for unfamiliar names, Social Security numbers, addresses, or accounts. If you think you have fraudulent information on your credit report, there are several things you will need to do.
Your first step should be to visit the Federal Trade Commission’s website, IdentityTheft.gov. The site is designed especially to help you report and recover from identity theft. Based on the information you provide, the FTC will create a personal recovery plan for you.
As part of your recovery plan, you will need to contact one of the three credit bureaus to place a fraud alert on your file. The credit bureau you contact must tell the other two. A fraud alert is free, lasts 90 days and will make it difficult for a fraudster to open a new account in your name.
Credit bureau fraud alert contacts:
Visit IdentityTheft.gov for lots more information on what you should do if you believe you are a victim of fraud or identity theft.
You may need a loan or higher credit limit
Planning on buying a home or car, or refinancing your mortgage? Checking your credit report is standard protocol for home and auto loan lenders. By checking your credit report and ensuring it is free of errors, you’ll have peace of mind that everything is correct before applying for a loan.
Even if buying a home or car is not in your near future, you never know when you might need to replace an appliance, fix your car, or pay for some other high-ticket item or service. In an emergency, you may want to apply for a personal loan or raise the available credit on your credit cards – both of which will require pulling your credit report. By checking your credit report now, you can avoid surprises later.
Remember, the information in your credit report determines your credit score – and your credit score affects your interest rate. The lower your score, the higher the rate. You may not even qualify for a loan at all if a lender deems your credit score too low. So if you find an error in your credit report, take the steps to fix it as soon as possible.
You have a right to view your credit reports from Experian, Equifax, and TransUnion once every 12 months at no charge. And it’s a myth that checking it will harm your credit score. A simple review of your credit report is considered a “soft credit check” and will not impact your score. A “hard credit check” – when a potential lender checks it to approve an application for credit – is different, and may slightly affect it since that will stay on your credit report for two years.
You have nothing to lose by checking your credit reports every year, and a lot of information to gain if you find something wrong.
How to request a free credit report
To request your free credit reports, visit AnnualCreditReport.com. This is a central website set up by the three credit reporting companies and is the only authorized website for ordering a free report. Beware of other lookalike websites that may have hidden charges or ask you to make a purchase in order to receive your report. At AnnualCreditReport.com, the credit reports will be completely free and can be ordered by phone or by mail.