Why You Should Check Your Credit Report

To make sure the information in it is correct. Some statistics say most credit reports include some type of error. These errors can be relatively harmless like an incorrect address. They can also be extremely harmful, like a collection account that doesn’t belong to you. It’s common for fathers and sons who share names to end up with the other’s accounts on their credit reports.

There’s a dispute process you can go through to remove these credit report errors, but you have to find the errors first. The only way to know whether your credit report has the right information is to check it periodically.

To detect identity theft. Identity theft happens when someone uses your personal information to create new accounts in your name. Unfortunately, many identity theft victims don’t realize the crime has happened to them until bill collectors start calling and sending letters. Or worse, when they’re denied for credit cards and loans because these fraudulent accounts have gone delinquent.

You can detect identity theft sooner by watching your credit report throughout the year. Review your credit report and look for accounts that don’t belong to you or that you won’t remember opening. Use the credit report dispute process to remove these accounts.

So you know what lenders see when they review your report. Whenever you apply for a new loan or credit card, lenders will check your credit report to decide whether to approve your application. They may ask some questions about some of the accounts that appear on your credit report. If you don’t know what’s on your credit report, these questions can be a complete surprise. Before you apply for a new loan, check your credit report so you know what your lender is seeing about you.

To find out what’s influencing your credit score. Your credit score is based solely on the information that appears on your credit report. If you want to know what’s bringing your credit score down, the perfect place to look is your credit report. Most credit reports include a detailed analysis that tells you what information could be hurting your credit score.

Until you check your credit report, you can only speculate about what’s affecting your credit score. Seeing late payments, collection accounts, and other negative account information will confirm the things that are hurting your credit score.

To take inventory of who and how much you owe. The good thing about your credit report it’s an almost comprehensive list of all your debts. If you want to start paying off your credit card and other debt, your credit report is a good place to look to figure out who you owe and how much you owe them. Before you start paying off your debt, check your credit report and create a list of your outstanding debts.

Keep in mind your credit report may not contain all your debts, because some of your creditors and lenders may not report to the credit bureaus. For those debts, you might check your billing statements.

How to Check Your Credit Report for Free

The federal government recently passed a law that allows every consumer to get a free copy of their credit report from each of the three bureaus once a year. That means once every twelve months, you can order your Equifax, Experian, and TransUnion credit reports.

Three Ways to Get Your Annual Credit Report

While there are many sites on the internet that promise to give you a free credit report, there is only one site – AnnualCreditReport.com – that allows you to access your credit report with absolutely no strings attached.

At AnnualCreditReport.com, enter your personal information (name, address, social security number, etc.) and you’ll be taken to a page where you can view your credit report from each of the credit bureaus. When you order your annual credit report online, you can view it instantly.

You can also order your free credit report by mail, by filing out the request form and sending it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Finally, you can request your annual credit report by phone by calling 1-877-322-8228. It can take up to 3 weeks to receive your credit report when you order it by mail or phone.

Those Other Free Credit Report Websites

When you order a free credit report from any other website, you typically must enter your credit card number and agree to sign up for a free trial subscription to a credit monitoring service. If you fail to cancel the subscription before the trial ends, your credit card will end up getting charged each month until you finally cancel. If you decide to take advantage of one of these free credit report offers, make sure you cancel before the trial ends to avoid having your credit card charged.

If you want to watch your credit reports throughout the year, order only one of your three annual credit reports every few months.

Related posts:

1. How to Get a Free Credit Report
2. What’s On Your Credit Report?
3. 7 Reasons to Pay Off Credit Card Debt

As you evaluate whether a credit card is right for you, consider both the advantages and disadvantages of credit cards.

Advantages of Using a Credit Card

Credit cards allow you to put off paying for purchases. Many people use a credit card because of the “buy now, pay later” feature. Credit cards allow you to make a purchase today and pay for it sometime in the future.

You don’t have to carry as much cash. Keeping $1,000 in cash in your wallet is dangerous. If the money is lost or stolen, it’s gone forever. Having a credit card with a $1,000 credit limit is safer. You can spend the same amount of money without the great risk of losing your money.

Credit cards offer more purchase protection. Federal laws allow you to dispute certain types of credit card charges directly with the issuer. For example, if order a product that’s damaged when you receive it, you can dispute the charge with your credit card issuer and avoid paying until the manufacturer replaces the item. If you’d paid with cash or check, you would be out of the money.

They help you build a credit history. You need a credit history if you want to buy a house or car, rent an apartment, even to get a cell phone in your name. Without a credit history, you face paying higher costs or even being denied for certain services.

With credit cards, you can make purchases over the internet. Most internet purchases require you to use a credit card. You can use a debit or check card for internet purchases, but a credit card offers more buyer protection in the case of damaged or missing merchandise and even in instances of credit card fraud.

You can use a credit card for emergencies. When an emergency comes up and you don’t have immediate access to cash, a credit card can be a lifesaver. You might need to pay for car repairs or a cover medical expense. Or, you may need a hotel stay for a couple of nights. A credit card can come in handy in unexpected financial situations.

Disadvantages of Credit Cards

Credit cards are more expensive than cash when you don’t pay your balance in full. If you don’t pay your balance off during the grace period, you’ll end up paying interest on the balance. The longer it takes you to pay off the balance, the more you pay in interest. When you use cash for purchases, you only pay for the cost of the purchase, not extra interest charges.

Credit cards encourage debt. Credit cards give you a false sense of your purchasing power. If you’re not careful, you can quickly charge up a balance that’s too high to pay. No one plans to get into credit card debt. Once you start using credit, you realize how easy it is to make purchases, and you start charging more. Keep credit card purchases to a minimum and pay off one purchase before you charge another.

Credit card issuers can change the terms (almost) at will. When you carry a credit card balance, the credit card issuer is in control. They can raise fees, increase interest rates, and close your credit card at their discretion. When card issuers change your credit card terms, you may be forced to pay off your credit card balance under the new terms. Other times, you can reject the credit card changes, but you have to give up your credit card to do it.

There’s an increased risk of credit card fraud. Thieves can steal your credit card, or even just your credit card number, and use it to rack up charges on your credit card bill. Credit card fraud can be difficult to detect, especially if you don’t monitor your billing statement. The good news it that you can avoid liability for stolen credit card charges by reporting the stolen credit card immediately. At most, you will only be liable for $50 in stolen credit card charges and that’s if you delay reporting a stolen credit card.

Make a Credit Card Work for You

Sure, credit cards have their drawbacks, but they have advantages, too. You can lessen the negative effects of using credit cards, by following a few guidelines:

• Pay your credit card balance in full every month.
• Monitor your billing statements closely and let your card issuer know about any suspicious activity.
• Keep your credit card purchases low so you can quickly and easily pay them off.
• Be careful about loaning your credit card, even to family and friends.
• Report a lost or stolen credit card immediately.

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