Why Is It Important to Review Your Credit Reports Annually
Updated · Apr 18, 2022
A credit report is a detailed outline of your financial history.
It includes information about the types of credit you have, how much you owe, whether you pay on time, and if you have any judgments or liens against you.
But since it is your credit history, don’t you already know all that?
Well, not exactly. There could be some unpleasant surprises.
Read on to find out:
- What surprises might be hiding in your report?
- How often can you check your credit score?
- How to recognize identity theft?
- How to fix mistakes in your report?
Learn All this and more is
Why Is It Important to Review Your Credit Reports Annually?
Your credit history reflects your financial situation and discipline. Your report shows you what lenders see when they access your records.
But that’s not all.
Here’s what else you can use your credit report for:
To Organize Your Finances Better
Your credit report is a valuable resource when it comes to managing your finances. You can make reviewing your credit report part of your budgeting routine.
Checking a credit report is a good way to make financial decisions and organize your priorities better.
Do you have to work on your score? Maybe you need another type of credit to diversify your mix? Or perhaps you have to lower your credit utilization rate?
All that information is in your report. Regularly monitoring it can help you improve your financial wellbeing.
Admittedly, changes in your score don't happen overnight. That said, credit bureaus update your information every 30-45 days.
So, how often can you check your credit score?
If you're actively working on improving it, you should check your report twice a year.
Otherwise, once a year should be enough.
To Build Your Credit Score
Your credit score is calculated based on your financial history. Lenders use it to determine your creditworthiness.
If you’re planning to apply for credit, you should raise your score to get more favorable terms.
Start by checking your history to see how your financial behavior impacts your score and identify areas for improvement.
Then, you can use your report to track your progress over time.
But how often can you check your credit score?
As often as you want. It won’t hurt it.
That said, it takes about six months for any change in your activity to make a difference in your score. So, twice a year is more than enough.
To Ensure That the Information Is Accurate and Up-To-Date
Checking your credit report regularly can help you catch inaccuracies on time. That way, you can fix them before they drag down your score.
If you find outdated or inaccurate information:
- Request a correction from the credit reporting agency. That’s why it’s important to get all three credit reports—from Equifax, Experian, and TransUnion. If one of them made a mistake, you should ask them to correct it.
- Send a dispute letter to the company that reported the inaccurate information to the credit bureau.
- File a complaint with the Consumer Financial Protection Bureau if you feel you’ve been treated unfairly.
To Identify Any Potential Errors or Fraudulent Activity
Why is it important to check your credit report at least once a year?
You could catch signs of fraud or identity theft. Some common red flags include:
- Unexplained or unauthorized changes to your personal details, like a new address or phone number
- A sudden increase in the number of inquiries on your report
- Accounts you did not open suddenly appear on your report
If you see any of these or any other suspicious activities, it is crucial to take action immediately.
You can place a fraud alert on your credit report. That way, anyone who can access your credit report will know your data has been breached. More importantly, creditors will take extra steps to verify your identity before extending a loan.
You can also file a police report and/or a complaint with the Federal Trade Commission.
To Identify Other Problems
In some cases, your credit report could reflect the actions of other people.
For example, if you're an authorized user of someone's credit card, their activity reflects on your credit history, too. If they're late with payments, it'll harm your score.
By checking your report regularly, you can catch those issues on time and address them.
How Can You Get Your Free Annual Credit Report
Another reason why it is important to review your credit reports annually is that you can do it for free.
You can get your free report once a year from each of the three major credit reporting companies—Equifax, Experian, and TransUnion.
As we mentioned above, it is important to request your three credit reports.
The credit bureaus might not contain the same information.
The easiest way to do that is at annualcreditreport.com.
Why is it important to review your credit reports annually?
For starters, it is a crucial step in maintaining financial stability and a good credit score. But more importantly, it can help you catch errors and fraud early on.
It doesn’t cost you anything, but it can save you a lot of trouble.
With an eye for research, Aleksandra is determined to always get to the bottom of things. If there’s a glitch in the system, she’ll find it and make sure you know about it.