The information in your credit report affects many aspects of your financial well-being. It is the basis for your credit score. And your credit score affects your ability to borrow money and the interest rates you will pay on every loan from credit cards and auto loans to home mortgages. It can also affect the insurance rates you’ll pay or your ability to land a new job or rent a new apartment.
Checking your report is also free. Federal law mandates that the three national credit report agencies (CRAs) provide one free report annually. The three CRAs are Experian, Equifax, and TransUnion. The only official website for these free reports is www.annualcreditreport.com. Be sure to request reports from all three agencies because information reported to each differs.
Checking your report regularly can protect you in these four important ways.
Enables You to Correct Mistakes
At least 1 in 5 credit reports had a confirmed error, according to a 2013 study by the Federal Trade Commission (FTC). Such errors can affect your credit score and ability to get credit. If you find any errors, dispute the information immediately with the CRA. Disputing Errors on Credit Reports from the FTC provides a quick guide.
Helps You Protect Yourself Against Identity Fraud
Often the first signs of identity theft show up on your credit report. How do you spot it? Look for any new credit accounts that you did not open, bad debts that aren’t yours, or credit checks for credit or loans that you did not apply for. Report these errors immediately to the CRA. You may also wish to request a credit freeze be placed on your account at all three CRAs. See Credit Freeze Information from the FTC.
Helps You Keep Your Credit Score and Credit Rating High
Most institutions base credit decisions on your three-digit credit score. About two-thirds of that score is based on two things: 1) your payment history (paying all bills on time is best) and 2) how much of your available credit you are using (less is good, maxing out your limits is bad). Reviewing your credit report enables you to check both these areas. If none of your financial accounts provides a credit score on your monthly statement, you may purchase your credit score when you request your free reports at www.annualcreditreport.com.
Helps You Prepare to Buy a Home or Other Large Purchase
Putting your financial house in order is particularly important when you plan to apply for a large loan, such as a home mortgage. Regularly reviewing your credit report in the year or two before you plan to apply for a mortgage enables you to check on potential errors and track your progress in improving your creditworthiness.
So How Often Should You Check Your Credit Report?
The Consumer Financial Protection Bureau recommends that you check your three credit reports at least once a year.
Tip: Depending on your circumstances, you may also be interested in checking on reports from some of the specialty consumer reporting agencies, which report on your history with specific products or services, such as medical payments or car insurance claims. See our recent story: Do You Check Your “Specialty” Consumer Reports Annually?
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