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Why Should You Monitor Your Credit?
It can happen in an instant, and it can happen
when you least expect it. Your credit report is
constantly changing. But does each change apply
to you and your credit?
The information on your credit report is compiled
by the credit reporting agencies, which regularly
receive data from creditors such as whether you
make payments on time and how much you owe. Creditors
are constantly reporting new information to the
credit reporting agencies, and your credit report
is updated each time.
What happens when changes to your credit do not
apply to you? Take a look at these scenarios:
You open your mailbox and find a letter from
a collection agency. It states that you purchased
a stereo system for $2,000 and have not made any
payments, and that creditor has now taken these
matters up with the collection agency. Unfortunately,
you do not recognize the creditor because you
never opened an account with them. But somehow,
someone used your name and credit and stuck you
with the bill.
You have your eye on the perfect car - it
fits your style and your pocketbook. When you
apply for your auto loan, you discover the lender
denied you based on your credit history of late
payments. Yet you have always paid all your bills
on time every single month.
You have decided to apply for a new credit card.
You find an offer for a card that has the lowest
interest rates yet, and would enable you to transfer
all your balances from other cards to this new
card. Yet when you apply for the additional credit,
you are rejected - after doing some research,
you find that someone who has a name similar to
yours has applied for credit several times during
the last few months and somehow, your files have
become mixed.
Don't let your credit report take you by surprise!
Situations such as these can happen at any time - maybe when you need your credit the most.
So why wait until it's too late to check
your credit? Monitoring your credit report on
a regular basis is a good way to maintain accuracy
of your credit information so it's ready
to be reviewed by lenders, landlords, or employers.
What should you be looking for?
In a word, inaccuracies. Your credit report is
a factual record of your payment history and other
credit-related items based on the information
as it is reported to the credit reporting agencies
by creditors and lenders. Sometimes information
may be reported inaccurately to the credit reporting
agencies, other times people with similar names
may have their credit files inadvertently mixed.
Increasingly, unfamiliar or inaccurate information
can also be an indicator of Identity Theft - when
someone uses your name and accounts without your
knowledge. You may want to look closely at the
following areas of your credit report to catch
any unfamiliar items:
- Personal information- This information is
reported to the credit reporting agency by
your creditors or other sources, and includes
your legal name (and any name variations),
date and year of birth, employers, and information
about your residence.
If you find an incorrect address or unfamiliar
suffix, such as Jr. or Sr., it could be an
indication that your file may have been mixed
with that of another person. Additionally,
an unfamiliar recent address change may indicate
that someone is fraudulently opening accounts
in your name, but routing the bills to a different
address.
- Accounts - This information includes credit
accounts or loans you have with banks, retailers,
credit card issuers, and other lenders. It
details information on each account you've
opened in the past, such as your credit limit,
current balance, and date the account was
opened. Check the detailed payment information
by month for possible incorrect late payments
or charge-offs. Also, you may want to check
for unfamiliar accounts or activity on accounts
that you thought were closed. Someone besides
you could be using the account, and could
indicate a sign of potential Identity Theft.
- Inquiries - This section shows you who received
information from your credit report during
the recent past. Inquiries remain on your
report for up to two years. There are two
types of inquiries you should be aware of:
- "Above the line" or "hard" inquiries
will appear on your credit report when
your credit is reviewed by potential creditors
with which you have applied for credit.
You can look for unauthorized inquiries
that may appear, as this may indicate
possible illegal activity.
- "Below the line" or "soft" inquiries
do not appear to creditors and do not
hurt your credit score. These include
inquiries made by prospective employers,
pre-selected credit offers from credit
marketing companies, account reviews from
your existing account lenders, and personal
inquiries, such as when you check your
own credit report.
- Public records - This information includes
any information that's contained in state
and county records such as bankruptcies, tax
liens, lawsuits, and judgments that relate
to your debt obligations. Public records remain
on your report for 7 to 10 years.
Again, you may want to make sure the information
in your credit file is correctly reported,
as this information stays on your report for
several years.
Next Steps
If everything looks accurate once you've
reviewed your credit report(s), then you can breathe
easy. Regularly monitoring your credit will help
you to make sure everything stays accurate.
If you do happen to find an inaccuracy, then you
have the right to dispute the information free
of charge. You can contact the credit reporting
agency that provided the information to request
an investigation into any inaccuracies. You can
also contact the creditor and ask that new, accurate
information be provided to the credit reporting
agency.
Finally, if you suspect fraud, you can contact
the credit reporting agencies and place a fraud
alert on your report. Then, you may also want
to contact your credit card companies, bank, and
the police to file a report to help protect your
accounts.
Click here to get started monitoring your credit
with your FREE 30-day trial to Experian®
Credit Manager PLUSSM, and receive
a FREE CREDIT REPORT AND SCORE!
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