Creditors and lenders use the information in your credit report – a detailed history of your credit accounts – to decide whether to approve your applications and to set rates when you are approved.
However, many credit reports contain errors, some of which are significant enough to affect your ability to obtain new credit cards and loans. It’s important to periodically check your credit report to ensure that the information being reported about you is accurate and complete. Otherwise, you may not discover that your credit report contains errors until you are unexpectedly denied a credit card or loan.
How to Use the Rule of Thumb
Checking your credit report gives you an in-depth look at every credit account you have, as well as a list of companies that have reviewed your credit report in the past two years. At a minimum, you should check your credit report at least once a year to ensure that the information is accurate and complete, and within the time limits set by federal laws regarding reporting negative information on credit reports. In most cases, a consumer reporting agency may not report negative information that is older than seven years or bankruptcies older than ten years.
“Consumers have the right to obtain a free credit report from each of the major credit bureaus (Experian, Equifax, and TransUnion) once a year. Consumers can space them out over several months instead of checking all three at once,” said Madison Block, Marketing Communications and Outreach Programs Officer at the American Credit Counseling Association, in an email to The Balance.
Note: You can get one free credit report per week from Experian, TransUnion, and Equifax until December 2023 at AnnualCreditReport.com.
Why the Rule of Thumb for Checking Credit Reports Works Generally
Your credit report changes frequently as businesses send updates about your accounts to the credit bureaus. Reviewing your credit report at least once a year allows you to catch and correct potentially harmful information due to identity theft, errors, or old entries. Correcting negative information on your credit report can improve your credit score and your ability to qualify for credit cards and loans at preferred rates.
Note: In addition to free annual credit reports, you are entitled to a free credit report when you are a victim of identity theft, have been denied a credit card or loan in the last 60 days, are receiving public assistance, or are unemployed and plan to apply for a job within the next two months.
Addressing Credit Report Errors
If you find an error in your credit report when you request it, the most effective way to fix it is to attack it from both angles:
- Correct the issue by contacting the credit reporting agencies and filing a dispute
- Fix the issue at its source: contact the creditor that reported the error
Try to resolve the mistake as soon as possible to avoid issues when applying for a loan or credit card, or when a potential employer or insurance company reviews your credit report. It’s best not to wait after noticing the mistake because the correction process can be slow.
Be Cautious
While it’s usually good to check your credit report one to three times a year, there are some situations where you should check your credit report more frequently. For example:
- You suspect
- Your identity has been compromised.
- You are planning to apply for a car loan or a mortgage loan soon.
- Your loan was unexpectedly denied.
- You are working to improve your credit score.
Request your credit report directly from AnnualCreditReport.com, one of the credit bureau’s websites, or through myFICO.com. Be cautious of scams related to free credit reports, and avoid clicking on links related to your credit report that you received via email, text messages, or pop-up windows. Scammers who communicate this way are trying to obtain your personal or financial information to commit credit card fraud or identity theft.
If you are using a “free” credit report service that asks for your credit card number, you are likely signing up for a free trial subscription of the service. You will need to cancel your subscription before the trial period ends to avoid being charged on your credit card.
Source: https://www.thebalancemoney.com/rule-of-thumb-how-often-should-you-check-your-credit-report-5115317
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