Free Annual Credit Report: Five Reasons Why You Should Get Yours

Most people do not think about their credit score until they find themselves trying to qualify for an auto loan, mortgage or new credit card. This can be a huge mistake. If you wait until you need credit to look at your credit report, you could find yourself in “credit hot water” that could take weeks or even months to straighten out.

 

Fortunately, the Fair Credit Reporting Act allows every American to receive a free credit report once a year from the three main reporting agencies: Equifax, Experian and TransUnion.

This is a valuable opportunity consumers should not let slip away.

 

Here are five reasons why you should request a free copy of your credit report once a year.

1. Catch Identity Theft

Identity theft is a serious crime that involves someone stealing your personal information to open a credit card account, get a loan or rent apartments in your name, or access your bank or retirement accounts. Identity thieves steal information in several ways, from dumpster diving to find documents that contain credit card numbers, Social Security numbers and other personal information, to hacking the computer networks and databases of organizations that store large amounts of valuable information.
Monitoring your credit report is a helpful way to spot signs of identity theft, such as errors and suspicious activity and accounts or addresses you don’t recognize. As soon as you suspect you might be the victim of identity theft, you should place an initial fraud alert on your file. You may request a fraud alert from each of the credit reporting companies over the internet or by mail. Catching identity theft early makes it easier to take control of the situation and fix problems before they spiral out of control.

2. Check for Errors

When reviewing your credit report, look for information that is inaccurate or incomplete.

Some common errors on credit reports are:

  • Identity errors such as your wrong name, phone number and/or address; accounts belonging to another person with the same or similar name as yours; and accounts resulting from identity theft.
  • Incorrect reporting of the status of your accounts. This can include closed accounts reported as open, accounts that are incorrectly reported as late or delinquent, and being listed as the owner of an account, when you are actually just an authorized user.
  • Data management errors, including accounts with an incorrect balance or credit limit, and accounts that appear multiple times with different creditors listed (especially in the case of delinquent accounts or accounts in collections).

If you find errors, you should contact the credit reporting company who sent you the report, as well as the creditor or company that provided the information

3. Confirm Personal Information

Have you married or divorced, changed your name or moved? Confirming your correct personal information is very important–especially since employers may pull your credit history as part of the hiring process.

4. Improve your credit score

Credit scores are based on information in your credit report used to calculate a value that suggests how likely you are to pay your bills in the future. Businesses use credit scores to estimate how likely you are to pay back loans or services. People with higher credit scores may be more likely to pay back their debts; while people with lower score are less likely to do so.

Reviewing your credit report can help you better plan for your future, whether you’re thinking about homeownership, buying a car or getting out of debt. A clear picture of your credit can help you determine your plan of action to improve your credit score.

It’s important to know that you could have multiple credit scores based on who provided the score, and whether the company used their own scoring model or a model available from a third party. Unfortunately, while federal law gives you the right to get a free credit report every year, it does not require the credit reporting companies to provide a free credit score.

5. Your Credit Report is Free

If the other reasons have not convinced you yet, this one will. You can obtain a credit report from all three major services absolutely free each year. Since there is no cost to you, why not check out your information?

Credit reports are one of the best ways to help you get your finances in order and start working towards a great future.

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