You’ve probably heard that you should check your credit regularly. But why is that advice given? Before you decide that you don’t really need to check your credit report, here are 4 reasons to take a look on a regular basis:
Prepare for a major purchase or life change
One of the biggest reasons that you should check your credit is in preparation for a major purchase. When you buy a home using a mortgage, the lender wants to verify that you are likely to make your payments. Another major purchase that requires a credit check is a car.
You might even need to prepare your credit ahead of moving into a rental. Many landlords want to see if there are potential red flags that could result in missed payments. Checking your credit ahead of time can be one way to prepare for what’s next.
It also makes sense to prepare for major life changes by checking your credit since there has been a movement toward including non-credit information, like utilities and rent payments, on credit reports. While such measure might be slow in coming, they could still impact you down the road. Pay attention to what is happening with credit reporting in the news so that you know what actions are likely to cause problems.
Identify and fix mistakes
Information from the Federal Trade Commission indicates that one in five consumers have an error on at least one of the reports issued by the major credit bureaus. Five percent of consumers have errors that could cost them more in terms of higher interest rates and even higher insurance rates (in some states).
You don’t want to be one of those whose credit reporting mistakes costs more money in the long run. Checking your credit report can help you catch mistakes and have them fixed. Credit reporting agencies are required by law to fix mistakes in a “timely” manner. While credit bureaus don’t have to remove negative and accurate information from your profile, they are supposed to update inaccurate information to provide a better picture of your behavior.
Check your credit report regularly and dispute inaccurate information. This should be done before you apply for credit so that you can avoid a nasty surprise while you’re sitting with the loan officer.
Look for signs of identity fraud
The FBI identifies identity theft as a major threat to many consumers. While you might not be able to prevent identity fraud in all cases, you can watch for signs to attempt to catch it early. Monitor your credit report for fraudulent accounts, which could be a clue that someone is using your name to open new lines of credit. You should also backup your efforts by checking your monthly account statements and checking your online banking for indications that your credit card numbers are being used to make fraudulent purchases.
By checking your credit report regularly, you can catch identity theft early and take steps to head off further problems. Some of these steps might include contacting local law enforcement or reporting the issue to the FTC. The longer identity fraud goes on, the harder it can be to reverse the impacts and avoid future issues.
Better understand your financial situation
Your credit report can also provide you with clues about your current financial situation. Consumer sites like Quizzle offer you access to credit reporting tools that allow you an overview of where you stand financially, based on the information in your credit report. This can help you make better decisions about your finances moving forward so that you have the ability to improve your credit situation.
Checking your credit report can also help you understand how those in the financial industry view you. Try looking at your credit report as if you were a lender trying to decide whether or not you are a good risk. Understanding your credit report from that standpoint can provide you with ideas for an action plan to look better for financial industry decision makers.
When to check your credit
The good news is that you can check your credit anytime, and it won’t impact your credit score or the information on your credit report. You are entitled to a free credit report every year from each of the three major credit bureaus. Additionally, there are consumer credit sites, like Quizzle, which allow you to look at information related to your credit report anytime for free. These resources can provide you with the ability to get a general idea of what to expect when you apply for credit, as well as stay on top of your situation. In some cases, consumer credit sites can also alert you to actions you can take to improve your situation and even save money.
While checking your credit report regularly won’t guarantee that you won’t have problems, the reality is that it is a good way to monitor your situation. At the very least, you can prepare for the most important purchases you plan to make ahead of time.
