Checking your credit report regularly allows you to see what creditors see when they’re evaluating your applications for loans and credit cards. Making routine credit report checks part of your regular financial maintenance plan can help you see where your credit stands, spot problems that could suggest identity theft or fraud and take measures to improve your credit score.
What is a credit report and why is it important?
A credit report is a document that details your history of managing and repaying debt. When you open a consumer credit account, the lender will typically report various information—balances, payment history, credit inquiries and more—to one or more of the three national credit bureaus.
The credit bureaus include this data in your credit reports that allows you and other organizations to get a full picture of your credit history.
When you apply for credit, lenders use your credit report, along with your credit score, to evaluate how likely you are to repay the debt on time. A borrower who has a well-established credit report with no negative marks will have an easier time getting approved with favorable terms than a borrower with a thin credit file or some negative history.
Other organizations and individuals that can review your credit reports include landlords, utility companies, leasing firms, insurance providers and employers.
Why is it important to check your credit report?
Checking your credit report regularly is crucial for building and maintaining a solid credit history. Here are some of the reasons why.
Stay proactive against fraud
Checking your credit file can help you spot potential identity theft or fraud early. If you see an address that’s unfamiliar, credit accounts you didn’t apply for or activity on credit cards you have not used recently, a credit report can give you a heads-up. Much like a medical checkup, finding a problem early can keep it from growing worse.
Spot and dispute errors
Credit reporting is a complex process, and not all errors suggest fraud. A payment that was mistakenly reported late by a lender, for instance, can impact your credit. If you find inaccurate information on your credit reports, you have the right to file a dispute with the lender or the credit bureau on whose report the error appears.
Take action to improve your credit
Your credit score is based entirely on the information in your credit report, so reviewing your report to see where you may be able to reduce debt and ensure information is current and correct can go a long way toward helping you build and maintain a pristine credit profile.
How often should you check your credit report?
At a minimum, check your credit report once a year, though it can make sense to do it more often if you experience any of the following situations:
- You’re planning to apply for credit to fund a big purchase, such as a house, car or boat in the next three to six months.
- You’ve received a notice about a data breach that has compromised your personal information.
- Your wallet, credit card or personal information (like your SSN) has been stolen.
- You’ve accomplished a major credit milestone, such as opening a mortgage loan or paying off student debt.
- You’ve noticed a dramatic swing in your credit score and don’t understand why it happened.
Remember that it’s a good idea to check your credit report from each of the three major credit bureaus. And anytime there is an unexpected change to one credit report, you should check the other two.
For more information on credit reports and improving credit, see the following articles: