We talk quite a bit about credit, and the importance of building the strongest credit score possible. To do so, you need to maintain low balances on your credit cards , pay all of your bills on time, and not apply for credit too often. In short, you need to manage your credit, and by extension your finances in a smart, careful way.
As you’ve probably noticed, it isn’t easy to keep track of all of these different, separate accounts and bills, and stay on top of everything. This is one reason why it’s important to check your credit reports often.
Additionally, given that nearly 80% of credit reports contain some sort of error (and 26% had a “material” or significant error), if there’s something on your report that doesn’t belong there, it’s best that you are aware of this.
Knowing there are mistakes on your credit reports is the first step to correcting them. This is a particularly serious issue today, considering how common identity theft (which can ruin your credit), has become in the modern era.
At the same time, you get busy. Life happens. You have to go to work, take care of your family, and, when you get a free moment, you’d like to relax and unwind. Checking your credit report might not seem like a priority – but deep down, you probably know it’s very important.
Annual Credit Report
For that reason, there are two things that we recommend you do, starting almost immediately. First, pick a specific date (let’s say around July 1, which is almost exactly halfway through the year).
On that date, you are going to visit Annual Credit Report , where, under federal law, you are entitled to receive a free credit report, from each of the three major credit bureaus (Equifax, Experian, and TransUnion). Sometimes, Annual Credit Report will have trouble verifying your identity. In these cases, you should use the mail-in form, which allows you to request the report by mail.
Make sure to examine that report carefully, for anything you don’t recognize, whether that be a late payment, a collection, or even an address where you never lived. If you spot anything at all, you will need to contact the credit bureau where this information appears, via certified mail, and file a dispute.
Credit Karma
Secondly, sign up for a credit monitoring site. Credit Karma is probably your best option, since it offers both TransUnion and Equifax reports, in a simple, easy-to-understand format. Credit Karma offers the Vantage credit score, which isn’t very widely used by lenders. Most lenders use some version of FICO. However, Credit Karma is still quite useful, in terms of knowing what appears on your TransUnion and Equifax credit reports.
We recommend checking Credit Karma once per month. Ideally, you’ll select the same date each month, to take a look at your credit reports. Since most accounts on credit reports update once per month, this will give you a good idea of where your credit stands, on a regular basis.
With Credit Karma, you can login in at any time, and will see the latest changes/updates to your credit reports. You should check your reports once per month, to make sure that nothing looks unusual.
Specifically, you should keep an eye out for anything that appears incorrect. Remember, mistakes on credit reports can reduce your credit score, costing you thousands of dollars extra for loans and insurance.
You should also keep a close eye on any credit inquiries you don’t recognize. Unrecognized credit inquiries can be the first sign of identity theft. Someone applying for credit in your name, means that they’ve gotten hold of your identity, and are trying to use your credit for themselves.
We suggest checking Credit Karma once per month. Each of your active credit accounts should update with the three major credit bureaus once every month, and this allows you to effectively keep track of where your credit reports and scores are. Pick a specific date each month when you’re going to login to Credit Karma, and put that on your calendar.
Experian
Credit Karma only provides your Equifax and TransUnion credit reports. However, they don’t offer reports or scores for perhaps the biggest credit bureau in the country: Experian. It is possible for certain types of information to not appear on your Equifax or TransUnion reports, but show up on Experian (and vice versa).
Fortunately, you can obtain your Experian credit reports for free from Experian.com. Experian will also offer access to your FICO score (using the FICO 8 model). Remember, most lenders are using FICO, and Credit Karma wasn’t providing you with FICO scores (and Annual Credit Report doesn’t offer credit scores at all).
Remember how you chose a date to log in to Credit Karma each month? You’ll want to do the same with Experian. In fact, if you can log in on the same day each month, that’ll probably make things even simpler.
Just as with Credit Karma, you should keep an eye out for unauthorized credit inquiries. These can be an early indicator that you’ve been a victim of identity theft. Of course, also make sure that nothing on your credit reports (i.e. existing credit accounts) are incorrect.
A Word About Disputing Credit Report Errors Online
If you have any sort of negative information on your credit reports, you’ll probably see a dispute button, which allows you to challenge negative information on your credit reports online. While this is a convenient option, you should avoid it.
Disputing information on your credit reports online can limit your legal rights, in the event that the errors are not corrected. Remember, sometimes credit report errors are so severe that you need to file a lawsuit, and you don’t want the fact that you dispute online to limit your rights.
Also, online disputing tools are designed for the convenience of the credit bureaus. They provide you with a limited set of reasons why you can challenge an account. Often, these reasons don’t cover the full range of cases why a credit report might be inaccurate. Or, they’re too narrow.
For these reasons, you should only dispute credit reporting errors by certified mail. If you think you need help addressing issues on your credit reports, it could make sense to hire a credit repair firm, to assist you.
The Final Word
It’s crucial that you regularly check your credit reports and scores, to make sure that everything looks proper. Errors on credit reports can lead to costly missed opportunities, and unnecessary stress. Also, identity theft is a real risk, and one that you must take strong measures to avoid.
By checking your credit reports regularly, through Credit Karma and Experian, you’ll be able to avoid these issues, and make sure your credit is in the best shape possible. You’ve got this!
