When it comes to your credit report, knowing what’s on it is important. But there’s a lot more to checking your credit report than that. Let’s take a closer look at some of the important questions surrounding your credit report and your credit score.
4 Reasons to Check your Credit Report
Let’s see why checking your credit is so important in the first place. Here are four reasons why it’s a good idea to check your credit report.
1. It May be a Good Indicator of Financial Health
Your credit report is kind of like a litmus test for your finances. If your finances are on rocky ground, your report might show some activity that can lead to a lower credit score. If your finances are solid and your habits are healthy, there’s a good chance your score is going to be relatively healthy. Either way, checking your credit report can give you some useful insight into why your credit score is what it is.
2. You May Spot Errors Potentially Lowering Your Credit Score
Another reason to check your credit report is that you may be able to catch any errors which could be hurting your credit score.
Generally, the info you see on your credit report is going to be accurate. But every once in a while, there may be a mistake that happens in the process of your information being reported. Some of the most common errors are:
- Incorrect personal information, like the wrong address or Social Security Number (SSN)
- Duplicate accounts showing the same active credit twice
- Missing payment information or delinquent accounts
- Personal loans, credit cards, and lines of credit you didn’t open
If you find an error on your credit report, contact the credit bureau that shows the mistake. You should also check with the other credit bureaus to make sure they aren’t showing the same error.
3. You May Catch the First Signs of Identity Theft
Sometimes, errors on your report are just that.
Other times, an error points towards a more serious issue like identity theft. As data breaches and cyberattacks become more common, the possibility of having your identity stolen is real.
Here are some of the warning signs that a criminal has compromised your credit:
- A change of address on your credit report
- Bills for items and services you didn’t purchase in your mail or email
- Unusual purchases on your line of credit or credit card
- A record of a cash advance you didn’t use
- Statements and collection notices for an unknown line of credit or credit card in your mail or email
If you think you’ve been a victim of identity fraud, contact one of the major credit reporting agencies right away. They’ll place a fraud alert on your profile, so it’s harder for an identity thief to open additional accounts in your name.
But don’t stop there. You’ll want to file a report with IdentityTheft.gov. It may help simplify your recovery plan by eliminating the need to file a report with the police in most cases, and it creates a personalized to-do list for you to follow.
4. It May Help You Impact Your Credit Score
Your credit report is an excellent learning tool — whether you’re building your credit history from the ground up or recovering from a credit problem.
Like a school report card, your credit report may show you where you’ve gone wrong — but also where you’ve gone right. This can give you some insight into what bad financial habits you might have fallen into which you can start to work towards fixing. It’s a straightforward way to measure your progress as you build your credit history.
It also may give you a better understanding of how long it could take to impact your credit score. Some things simply take time to come off your credit history.
A bankruptcy, for example, may last either seven or ten years on your report. If you’re recovering from a past bankruptcy, you may have to wait a decade before it’s struck from the record[1].
How Many Free Credit Reports Are You Entitled to Each Year?
You are entitled to one free credit report from each of the major credit reporting agencies every year. That means you can get a total of three reports over the course of 12 months.
We suggest trying to use them throughout the year. This lets you check in on your credit report periodically to make sure everything’s on track. If you’re ready for your first credit check, visit AnnualCreditReport.com to get started.
Does Checking Your Credit Score Lower it?
The million-dollar question — does checking your credit score lower it — has an answer: no! As long as you’re checking your credit score yourself, you won’t lower it. However, applying for a loan can sometimes trigger a financial institution to make what’s called a hard inquiry into your credit which may impact your credit score.
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However, when you check your credit score, the major credit agencies use a soft inquiry or a soft check. A soft check is only visible to you and won’t impact your score.
Soft Checks vs. Hard Checks
Credit agencies aren’t the only ones to use soft credit checks. Employers, landlords, and some lenders may perform a soft credit check.
Some lenders, on the other hand, might do a hard check. This gives them a more detailed look into your full report. Anytime a lender uses a hard inquiry, the check will be recorded on your report, and it may impact your score.
Disclaimer: The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only, and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through FreshStart Blog or CreditFresh website.
[1]https://www.creditkarma.com/advice/i/bankruptcy-credit-reports/
