As many as one in three Americans don’t check their credit reports. Are you one of them? You’re entitled by law to check your reports for free one time per year, and it’s a very good idea to do so. If you’re not already checking your reports, here’s what you need to know.
What are your credit reports?
Your credit reports are records of your credit, loan and payment history. Businesses that provide you with loans or lines of credit or that seek to obtain overdue payments from you may report this activity to any of the three nationwide consumer credit bureaus. Each of these bureaus assembles and maintains a different version of this information as one of your credit reports.
What’s in your credit reports?
Each of your credit reports will typically include the following information:
- A list of businesses that have given you credit or loans
- The total amount for each loan or credit limit for each credit card
- How often you paid your credit or loans on time and the amount you paid
- Any missed or late payments as well as bad debts
- A list of businesses that have obtained your credit report within a certain time period
- Your current and former names, address(es) and/or employers
- Any bankruptcies or other public record information
Why are your credit reports important?
Your credit reports are a major part of your financial reputation. The contents of your reports are used to calculate your various credit scores. This information plays a big role in determining what loans and lines of credit you can qualify for, and which terms (such as interest rates) you can obtain. Landlords and employers may even look at your credit report when deciding whether to rent housing or extend job offers to you. Your credit report also shows which businesses claim that you’ve borrowed money from them and which report that you have late or missed payments.
Why should you check your reports?
There are two very good reasons to check your credit reports: because they might be inaccurate, and because they might reveal accounts or late/missed payments you don’t know about.
One survey found that one in five people find inaccuracies in their credit reports. Inaccurate negative information on your report can do needless damage to your credit score. Inaccurate personal information may make it difficult for financial institutions to contact you with important information, allow the theft of your identity and/or be evidence that your identity has already been compromised.
One in ten people discover an account in collections or a late payment when checking their credit report. These items can do serious harm to your credit score. If you discover accounts that you don’t recognize, it may be that someone has stolen your identity and borrowed money using your name.
How do you check your report?
The official website for accessing your free yearly credit reports is www.annualcreditreport.com. The directions on the site will walk you through the process of retrieving your reports from the three credit bureaus. You’ll be required to enter personal identifying information such as your Social Security number and answer questions about your identity to confirm that you are who you say you are. Remember, your reports are completely free, so don’t enter any payment information unless you want to purchase something other than your credit reports.
What should you look for in your reports?
Make sure that you recognize the information on your credit report, including your personally identifiable information, such as names, addresses, Social Security number, accounts and loans. Then check that the other information on your credit report is accurate and complete. Visit this page for more information on which errors to look for.
What should you do next?
If you find information that you believe does not belong to you or is not correct, contact the business that issued the account or the credit reporting company that issued the report. See this page for information on the dispute process.
If you believe your identity has been stolen, see this page for advice and resources.
If everything in your reports is correct, you’re done. Consider saving or printing a copy of your reports for your records, and set a reminder to check them again in one year.
Pat yourself on the back! You’ve completed an important step toward protecting your financial wellbeing.