Just like a physical from the doctor reveals steps you should take to improve your health, a financial checkup helps you figure out how you can improve your finances. Checking your credit report is one way to decide what needs improvement. You know to get a physical checkup from the doctor once a year and a dental checkup twice a year, but just how often should you get a financial checkup?
Now that we're entitled to free annual credit reports, it's a given that you should check your credit report once a year. But, there are other triggers for checking your credit report.
You're preparing for a major credit-based purchase like a home, automobile, or boat
Your credit history is one of the primary factors used in loan approval. You'd be surprised at the credit report entries that could get your application denied. Even an unpaid $16 library fine from four years ago can keep you from your dream home.
It's a good idea to get a credit report six months prior to making a loan application to clear up any discrepancies. This includes applications for private student loans and other installment loans, too.
You've been denied for a credit card, loan, or other credit-based service
If your credit was used in the decision, by law, you're entitled to a free copy of your credit report. The creditor or lender should send this letter to you within 10 business days. It will tell you why you were denied and include information explaining how you can obtain a free copy of the credit report used in making the decision.
Once you get a copy of your credit report, review it to make sure that the decision wasn't made because of inaccurately reported information. If you do find a mistake on your credit report, dispute it with the credit bureaus and request that an updated copy of your credit report be sent to the lender. You may be able to resubmit your application once your credit report has been corrected.
You suspect your identity has been stolen
Unfortunately, identity theft is becoming more common. It can go unnoticed for months, even years if you don't regularly check your credit report. You might not find out your identity has been stolen until you have a loan or credit application denied.
Phone calls and letters from collection agencies for accounts you never opened might indicate your identity has been stolen. Check your credit report to see if the accounts in question have been reported to the credit bureaus. If you discover your identity has been stolen, report it to the credit reporting agencies immediately.
You're making a plan to repair your credit or get out of debt or both
Since your credit report contains most, if not all, of your financial accounts, it's a good place to start when you're focused on getting financially fit. You can easily use the information in your credit report to create your plan whether it's to fix your credit, get out of debt, or a combination of the two.
Once a year
Don't wait until you need good credit to check your credit report. Check your credit report periodically to stay up to date on what your creditors are saying about you.