Last updated on April 14th, 2023
Protecting your credit is something many take for granted. With the security features that come with most credit cards, it’s easy to assume that our credit is safe.As the novel coronavirus (COVID-19) pandemic has shown, however, nothing is certain. This reality is especially true when it comes to credit and your finances. Here’s why it’s important to check your credit report now.
What Is a Credit Report?
Credit reports are a historical record of a person or company’s financial responsibility. Credit reports provide lenders with information on the debts, frequency of on-time payments, varieties of credit, and late payments for a credit applicant. Lenders use the information contained in a credit report to decide whether they should grant the applicant credit, including for credit cards.
There are three leading credit reporting agencies: TransUnion, Expedia, and Equifax. According to the Fair Credit Reporting Act, Americans can receive one free credit report from each agency every 12 months without the need for a hard inquiry or credit card.
Reasons to Check Your Credit Report Regularly
Because credit reports play an essential role in the ability to get credit, individuals and businesses must take the time to check their credit reports regularly. Here’s why:
Ensure Your Report Is Accurate
One of the best reasons to keep tabs on your credit report is to make sure the information it contains is accurate. Checking your credit score provides some insight into your report, but it doesn’t include the whole story.
The credit scores many free applications provide only give a rough estimate. Accessing your credit report, however, gives you the full picture. Having access to the full credit report lets you check for errors. Errors in reports might include inaccurate information on accounts you have, credit inquiries you never authorized, and more.
Know Where You Stand Before Applying
Applying for a credit card, mortgage, or other loan results in a hard inquiry. Hard inquiries are when lenders access your credit report to check your suitability for additional lines of credit. These hard inquiries also result in a dent in your credit score – even if they don’t approve your application.
Understanding the information in your credit report gives you the upper hand when applying for credit cards in the future. Knowing exactly what’s in your report lets you make better decisions about which cards to apply for – and for which ones you have better approval odds.
Protect Yourself from Fraud
Protecting yourself from fraud is a critical reason for checking your credit report. Fraud has a direct impact on your credit, including the danger of severe damage to your credit score. Credit fraud occurs for a variety of reasons, including card skimming, lost credit cards or wallets, or even identity theft.
Because of the severe impact fraud has on credit, staying up to date with your credit report gives you the edge in catching these issues before they have catastrophic effects on your finances – and your life.
How to Protect Your Credit
Given the importance of credit reports, what can consumers do to protect themselves – and their credit score?
The simplest option is to take advantage of the free credit report the Fair Credit Reporting Act entitles Americans to every year. These annual reports are akin to a physical, letting you check how your reports look and alerting you to any suspicious changes. This option may be ideal for those who make little use of their credit.
For those who frequently use their credit cards, however, a yearly credit report check may not be enough. If you use your credit regularly or plan on applying for additional credit, a credit monitoring service makes perfect sense.
Credit monitoring services allow individuals to check their credit report whenever they want and how often they need. Services like TransUnion provide daily updates and give customers the chance to lock their credit reports instantly if they suspect fraud. These services also offer advanced credit recommendations to assist those looking to rebuild credit.
Related Article: What Are the Easiest Credit Cards for Bad Credit to Get?