Are You Checking Your Credit Report Enough?

If you want to get an idea of where you stand, credit-wise, checking your credit report is a good place to start. Your credit report – or more accurately, reports, since each credit bureau produces its own report on you – is a documentation of your credit history. Each report includes a list of accounts you’ve owned, including credit cards, loans and other forms of credit, along with each account’s payment history, status and other important details.

Periodically reviewing your credit report is necessary for catching fraud and errors. Sensitive data breaches have unfortunately become commonplace. For instance, more than 48 million people had their personal information compromised in a T-Mobile data breach in 2021. Overall, identity theft affects 1 in 20 Americans each year.

But how often do you actually need to check your credit? Keep reading to find out.

The ideal frequency for reviewing your credit report depends on your current situation. However, obtaining and reviewing your credit report once a year at minimum is a good rule of thumb, according to Frederic Huynh, a former lead data scientist for FICO and the vice president of data optimization at Freedom Financial Asset Management.

But there are situations when it makes sense to check more often. “If you have been consciously working to improve your credit, and perhaps have an eye on applying for a mortgage or another significant loan, you may want to check once every two to three months to make sure all data is accurate,” Huynh says. “If you are about to make a big purchase that requires a loan, it may be helpful to check reports a few months before so that there are no surprises.”

It also makes sense to check your credit report more often if you have been the victim of identity theft in the past, have had fraudulent charges on a credit card, or have had personal information compromised in a data breach. In addition, “some experts advise people who’ve recently gone through a divorce to check reports every few months,” Huynh says.

Though you should regularly check your credit reports to review your own behavior, an even more important reason is to catch errors and potential fraud, according to Mike Sullivan, a personal finance consultant with Take Charge America, a nonprofit credit counseling and debt management agency based in Phoenix.

“Without looking at your credit report, you cannot know if you have been a victim of identity theft or fraud,” Sullivan says. “Even honest mistakes by creditors or credit reporting agencies can affect your ability to borrow and your borrowing costs.”

That’s because the information contained in your credit reports is used to develop credit scores, explains Huynh. “The three main credit agencies (Experian, TransUnion and Equifax) rely on past payment history to gauge how borrowers will do in the future. If there are any errors on credit reports, scores may suffer,” he says.

A poor credit score can significantly impact your ability to borrow money – whether it be for a house, a car or even a personal or business loan – as well as the interest rate you will pay.

Even if you don’t plan to borrow any money, errors or fraudulent activity can impact other areas of your life. Huynh notes that your credit report is sometimes reviewed by potential employers, especially if the job requires handling large sums of money. Furthermore, your credit score can affect your ability to rent an apartment, lease a car and get a lower auto insurance rate, he says.

When a third party pulls your credit report, resulting in what’s known as a hard credit inquiry, your credit score can be negatively impacted. “Hard inquiries are inquiries from a financial institution, when it is making a lending decision (such as approval for a mortgage or credit card),” Huynh says. He explains that hard inquiries can take a few points off your score, though the impact is generally minimal and only temporary.

However, if you’re worried about potentially harmful consequences, don’t fret. “Checking your own credit score is considered a soft inquiry and soft inquiries do not affect credit profiles,” Huynh says.

Everyone age 14 and older is allowed to check their credit reports from the three major bureaus for free. Previously, you could only request a copy once per year. However, in light of the COVID-19 pandemic, you can request a free copy weekly until the end of 2022. Here are some steps you should take:

You might assume that your credit report and credit score are the same. They’re related, but it’s important to understand that your report and score are two different things. Your credit score is a three-digit number that represents your creditworthiness; the higher your score, the more trustworthy you appear to creditors. “Information from credit reports is used to develop credit scores,” Huynh says.

It’s a good idea to keep tabs on your credit score in addition to your credit report, since your score can give you a quick snapshot of your overall credit health.

Unfortunately, credit scores are not provided on free credit reports from annualcreditreport.com. You have to review your credit score separately. “Many financial institutions and lenders now provide credit scores to their customers in their monthly statements or online,” says Huynh. This is a good way to see one or more of your scores for free. Some may provide your FICO score, which is the score used by most creditors when making lending decisions.

Sites including Credit Karma and Credit Sesame also provide free credit scores, using the VantageScore scoring model. While VantageScore scores are typically similar to FICO scores, they aren’t used as frequently by creditors to approve or reject an application.

Be aware that some companies will provide you with your score for a subscription fee, though they will sometimes market themselves as a free service. “Some companies may offer to show you your credit score, but only in return for signing up for credit monitoring for a monthly or annual fee,” says Huynh.

Whether or not these services are worth the cost is up for debate. Huynh notes that credit monitoring services, some of which are owned by the credit bureaus themselves, can be helpful for people with ongoing credit problems, such as identity theft.

“But they don’t correct errors,” he says. “They just notify the client if there is a suspected error or problem.” They also can be expensive. Huynh points out most consumers can get the same information on their credit reports, although that requires manually checking your report rather than getting an alert.

You might be wondering how often you can check your credit score. Unlike credit reports, there’s no limit to how often you can check your scores. However, most are updated on a monthly basis, so there’s really no need to check more often.

If you do find an error on your credit report, it’s important to report it right away. If you’re reviewing your credit report online, there should be a button on the page to submit a dispute, according to Sullivan. “However, this may not provide the consumer with proof that a transaction was contested,” he says. “It is best to also send a written letter to the agency so that you have proof.”

Huynh adds that under the Fair Credit Reporting Act, the credit bureaus must investigate any disputed items and correct the information if it cannot be verified.

If upon reviewing your credit report, you find some negative items that could be dragging down your score, know that you can take steps to improve your overall credit.