If you’ve ever taken care of a sick child, you’ve probably checked their temperature much more often than you would ordinarily — and you may be using an actual thermometer instead of gently touching a forehead or neck to get a rough idea of whether there’s a fever. But what do you do when the patient is your credit? It’s not as if you can monitor check your credit a few hours after administering the “medicine” to be sure it’s having the desired effect. How do you know what’s prudent and what’s obsessive?
First, it depends on what you mean by credit. If you mean credit reports, the information about you and your payment history, checking annually seems reasonable unless you have a specific reason for reviewing it more often. The information used to calculate your credit scores comes from these records, so you’ll want to make sure they’re accurate and that your information is not mixed up with someone else’s. The bureaus do not share information with each other, meaning there can be variations across all three reports, so you’ll want to look at all of them. (If you have never done this before, we suggest getting all three at the same time. After that, some people choose to check them at different intervals — such as one every four months.) If you find mistakes, you can dispute them.
Though it can seem a bit obsessive to check your credit regularly, it’s absolutely necessary today. It’s not just lenders who rely on your credit report, but also employers and even insurance companies.
The average person’s credit is checked several times each year by different institutions. You should make sure that you also monitor check your credit score regularly, so you’ll know exactly what those institutions are seeing – and so you won’t be surprised by what your report contains.
Your credit score and report contain information about how you handle your borrowing. A lender can see this when they’re making a decision about you.
By checking your credit report you can see what a lender sees. This means if you’ve been rejected for credit, or you want to know how successful you might be before you apply, you can see the reasons that may influence the lender.
Understanding these factors, especially the negative ones, means you can try to do something about them. Negative factors include things like having an account with several missing payments or not being on the electoral roll.
Some issues aren’t so easy to improve, but others – such as correcting mistakes on your account - can be fixed relatively easily. You just need to raise a dispute with the relevant credit reference agency.
A report from CNBC found that nearly 80% of credit reports contain errors. That fact alone should provide all the motivation you need to check your credit report regularly.
This is another situation where you won’t receive alerts letting you know what’s going on. And the possibilities as to what can be reported in error are almost unlimited.
For example, a creditor might report a late payment that you actually made on time. In such situations, it’s always best to deal with that kind of error as soon as possible. If you have evidence refuting the late payment, it’s best done immediately. If it sits on your credit report too long, your documentation may disappear.
Still another situation is when you have a common name. That opens the possibility of having someone else’s bad credit appearing on your credit report. It’s even possible to have loans that aren’t even yours showing up on your report. The sooner you deal with these errors, the easier it will be to handle them.
If you’re planning to apply for a new loan, particularly a home or a car loan, it’s a good idea to monitor your credit score well in advance of making application. Many people don’t bother to monitor their credit score in advance, and only find out about problems when a lender pulls their credit report. That creates complications.
If you’re in a competitive bidding situation for a house, or you need a car loan right away, the process can be impaired by either credit errors, delinquent information, or items that are not actually yours. It can often take weeks or even months to have those situations corrected. But if you need a loan right away, surprise credit problems can delay the process.
This can be particularly difficult if you’re looking to purchase a home in a very competitive market area. If homes normally receive multiple bids, you could lose your opportunity because of previously undetected credit issues.
Anytime you plan on making a major purchase; you should begin the credit monitoring process months in advance. This will give you plenty of time to deal with whatever issues might arise.
The higher your credit score, the more likely you are to be offered the best interest rates. You’ll also be eligible for the top products, reserved for people with the highest credit scores (this includes credit cards with long-term 0% interest periods).
It’s worth checking your credit score and report so that you can identify ways to improve your score and save yourself money. And if you’re thinking about making a big purchase or taking out a new mortgage, this could save you a lot of money.
It doesn’t have to take forever to improve your credit score. For example, lenders commonly hold data about you for up to 6 years. This means if you spot something on your account This could help boost your score.
Monitoring your credit report will mean you’ll be able to see any new activity on your account – including any activity you may not recognise. So, in the unlikely event you’re a victim of identity fraud, you’ll be able to notice the signs quickly (and if you check your report regularly, you’ll be able to spot this even quicker).
The first sign of identity fraud is often when a hard credit search (aka credit check) is carried out on your account. If this isn’t done with your consent, it could mean someone is trying to take out credit (i.e. a credit card or loan) in your name.
Your credit report will list your history of hard and soft searches so you can easily keep an eye on the searches that might be fraudulent.
You can find out more about where to see your searches in your ClearScore report and what you can do if you spot fraud in our 5-minute monthly checklist.
In a nutshell:
Understanding the negative factors in your credit report can help you do something about them so you can try and avoid being rejected for credit
Monitoring your credit score and report can help you find ways to improve your score and therefore increase your chances of getting the best interest rates on credit cards, loans and other products including mortgages.
Looking at your credit report regularly could help you spot the early signs of identity fraud, meaning you can raise the alarm more quickly if something were to happen.
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