The Importance of Checking Your Credit Report

4 Min. Read

A good credit score is a critical aspect of financial well-being. It can open the door to financial opportunities, from getting a mortgage to locking in the best rates on loans and credit cards. However, maintaining your credit requires regular monitoring and proactive management.

In this blog, you’ll meet two friends, Oliver and Jesse, who take different approaches to managing their credit. Their experiences offer valuable lessons on the importance of regularly checking your credit report and proactively managing your credit score.

Meet Oliver: The Vigilant Monitor

Oliver is a young professional who recently graduated from college and started working for a marketing firm. He’s meticulous about his finances and keen on building a strong financial future.

Oliver’s goal is to buy a house within the next five years, and he wants to ensure he’ll get the best possible mortgage rate. He’s also thinking about starting a side business, which means he may need a small business loan.

Oliver checks his credit report regularly, rotating between the three major credit bureaus. He also uses a free credit monitoring service offered by his bank to stay in the know about changes to his credit score.

One day, Oliver received an alert from his credit monitoring service about a new inquiry on his credit report. Knowing he hadn’t applied for new credit; Oliver immediately checked his credit report and discovered a fraudulent credit card application. He contacted the credit bureau and the creditor to dispute the inquiry and prevent potential identity theft. Whew—crisis averted!

Because Oliver monitors his credit regularly, he can quickly catch and resolve errors and potential threats. His vigilance ensures he maintains an accurate, high credit score. And when the time comes for him to apply for a mortgage or a small business loan, Oliver can rest assured that he’ll qualify for the lowest interest rates.

Meet Jesse: The Oblivious Ignorer

Jesse works as a graphic designer. She’s a bit more carefree with her finances, believing that as long as the bills are paid, there’s no need to worry about pesky things like credit reports.

Like Oliver, Jesse dreams of buying a home someday, but she hasn’t set a concrete timeline. She lives in the moment and prefers not to think too much about financial details.

Jesse rarely checks her credit report, only once every few years, if prompted by an unusual situation. She doesn’t see the value in regular credit checks and is unaware of the free credit monitoring services to help her stay on top of her credit score.

Recently, Jesse applied for a new credit card to take advantage of a rewards program. Unfortunately, her application was denied. Confused, she checked her credit report for the first time in years. She discovered several negative marks, including a few late payments and a collection account from an unpaid medical bill she’d forgotten about.

Jesse also found a fraudulent account that had been damaging her credit for over a year. Disputing these errors and rectifying her credit report was stressful and time-consuming—it was exactly how Jesse preferred not to spend her time!

Because Jesse neglected her credit report for so long, her credit score was significantly lower than Oliver’s. When she’s ready to apply for a mortgage, she likely won’t qualify for the same low interest rates, which means she’ll spend much more over the life of the loan.

How to Check Your Credit Report

So, should you monitor your credit score? You bet you should! If Jesse and Oliver’s experiences have you wondering how to monitor your credit effectively, we have answers to the most frequently asked questions below. These tips make staying on top of your credit score easy.

What are the Three Credit Bureaus?

The three companies that report credit scores are Equifax, Experian, and TransUnion. These credit bureaus gather information on you and your financial history, which is the basis for your credit score.

How Often Should I Check My Credit Score?

It’s a good idea to check your credit score monthly and obtain a full copy of your credit report annually. Many banks and credit unions offer you free access to your credit score, allowing you to keep a close eye on it.

How Can I Get My Credit Report for Free

You can get a free copy of your credit report once every 12 months from each of the three major credit bureaus through AnnualCreditReport.com

Where is the Best Place to Check Your Credit Score?

The best places to check your credit score include:

• Credit Bureaus. Each of the three major credit bureaus offers a free annual credit report through AnnualCreditReport.com.

• Financial Institutions. Many banks and credit unions offer free credit monitoring services to their customers. They often give you access to your credit score through online banking.

• Credit Monitoring Services. Credit monitoring services like Credit Karma provide free access to your credit score and tools to help you monitor and manage your credit.

• MyFICO. For a fee, MyFICO provides access to your FICO scores and detailed credit reports from all three bureaus.

How Do I Monitor My Credit Score?

The following steps can help you effectively monitor your credit score:

• Regularly check your credit score. Use the tools offered by your bank or credit union or free credit monitoring services to check your credit score regularly. Check your score at least once a month.

• Review your credit reports. Obtain and review your credit reports at least once a year. Verify all the information for accuracy and dispute any errors.

• Set up alerts. Many monitoring services and financial institutions offer alerts that notify you of significant changes to your credit report, such as new accounts opened or potential fraud. These alerts can help you react quickly to potential threats.

• Use financial tools and apps. Tools like Credit Karma give you access to your credit score and offer insights into your credit utilization, payment history, and other factors affecting your score.

How Do I Verify My Credit Report?

There are several steps you can take to verify your credit report:

• Request your credit reports. Obtain your free annual credit reports through AnnualCreditReport.com.

• Review your personal information. Ensure your personal information (name, address, Social Security Number, etc.) is accurate and up to date.

• Review your account information. Verify that all the accounts listed belong to you and that the information (account numbers, balances, payment history) is correct.

• Check public records and inquiries. Ensure that public records (like bankruptcies or tax liens) and hard inquiries (credit checks from lenders) are accurate and were authorized by you.

• Dispute errors. If you find any errors, dispute them with the credit bureau. After you provide documentation to support your claim, the bureau is required to investigate and typically responds within 30 days.

How Many Times Can I Check My Credit Score Without Hurting It?

You can check your credit as many times as you want without affecting your credit score. Checking your own credit is known as a “soft pull.” Unlike a “hard pull,” which occurs when you apply for credit and can temporarily lower your score, soft inquiries don’t hurt your score.

How Long Do Late Payments Stay on My Credit Report?

Late payments are just one type of misstep that can create a negative mark on your credit report. Negative marks can stay on your credit report for varying lengths of time:

• Late payments typically remain on your credit report for seven years.
• Collections generally stay on your credit report for seven years.
• Foreclosures remain on your credit report for seven years.
• Bankruptcies can stay on your report for up to 10 years, depending on the type.

Learn more about how negative marks affect your credit report here.

What Should I Do If I See an Error on My Credit Report?

If you find an error on your credit report, you should:

• File a dispute with the credit bureau that issued the report.
• File a dispute with your credit card company or the creditor involved.
• If you suspect fraud, escalate your dispute to fraudulent claims.

Learn more about how to dispute an error on your credit report here.

Lessons Learned: The Importance of Checking Your Credit Report

In closing, let’s reflect on the lessons we learned from Oliver and Jesse’s stories:

1. Regularly monitoring your credit report keeps you informed of your credit health and can help you quickly catch and resolve potential threats.
2. Understanding your credit report empowers you to maintain an accurate and high credit score, which is critical to your financial well-being.
3. Taking a proactive approach to monitoring your credit report can help you secure your financial future and stay on the right path to achieving your financial goals.

Keeping a close eye on your credit score can help you quickly identify and resolve errors, protect yourself from potential fraud, and ensure your credit accurately reflects your financial behavior. On the other hand, neglecting to monitor your credit can lead to unwelcome surprises and long-term financial consequences.

Remember, taking a few simple steps to manage your credit today can make a significant difference in your financial future.

Learn more about How to Build Credit and Understanding Credit.