Americans love their credit cards. Like really, really love their credit cards. Earlier this year, the Federal Reserve noted that aggregate credit card debt topped the $1 trillion mark, joining auto loans and student loan debt over $1 trillion in aggregate owed. The $1.027 trillion owed according to the most recent Fed update is also an all-time high, breaking the previous high set before the Great Recession.
In terms of ownership, roughly seven out of 10 Americans have at least one credit card, says CreditCards.com. If we use data from the U.S. Census Bureau of adults aged 18 and up, this works out to roughly 174 million people.
Cybercriminals may have your personal info
So as you might imagine, when news hit the wires more than a month ago that Equifax (NYSE:EFX), one of the three major credit reporting bureaus, had suffered a data breach, the card-carrying public was a bit worried. According to Equifax on the day it admitted to the data breach, Social Security numbers, birth dates, addresses, and in some instances driver's license numbers and credit card numbers, were made available to hackers. It announced at the time that up to 143 million people could be affected by the mid-May-through-July hack, with Equifax updating that total just days ago by adding another 2.5 million people to its original total, raising the total to 145.5 million.
The worry here is that no one knows whether his or her information was compromised, and if it was, to what extent. With Social Security numbers, criminals could do a lot of financial damage. As a result, Equifax and practically every financial advisor in the country have recommended that anyone with a credit report check that report to scour for any errors or anomalies.
The prospect of having the personal information of 145.5 million people (including yours truly) exposed to criminals is terrifying. But it's still not as scary as the number of people who've never looked at their credit report before.
This is even scarier than the Equifax data breach
According to a recently released survey from CreditCards.com, 26% of Americans reviewed their credit reports in the two weeks following the Equifax data breach. Meanwhile, it found that 21% of card-carrying consumers had never checked their credit reports or credit scores. A separate study from Bankrate, conducted by Princeton Survey Research Associates in April 2016, found that 34% of Americans had never checked their credit report. That's around 83 million people.
Now here's what's really scary. A 2004 study conducted by the National Association of State Public Interest Research Groups found that, over a 15-year period, 79% of all credit reports contained some type of error, with 25% of those errors being serious in nature. By "serious," it means an error that could cause someone's credit score to be adversely affected to the point where that person is denied access to credit or a loan.
A more recent study from the Federal Trade Commission in 2013 found errors in 21% of all credit reports, with 5% of them being serious. Still, that's more than 52 million Americans (21%) likely to be walking around with an error on their credit report right now, and many millions, if not tens of millions, won't realize it's there because they've never checked their credit report.
Psssst! Checking your credit report is free and takes just minutes
The real kicker here is that checking your credit report takes but a few minutes, and it can be done completely free once a year. The Fair Credit Reporting Act requires each of the three reporting bureaus -- Equifax, TransUnion, and Experian -- to provide you with a copy of your credit report once every 12 months for free. You can obviously check your report more often for a nominal fee as well, but did I mention your annual report is free?
It's worth noting that since each bureau has its own credit reporting and scoring system, what you find on each report could be a bit different. This is why it's important to check your credit report closely for all three bureaus and not just one. You might see that everything is perfect with one or two bureaus, only to find an error buried on a third report that's dragging down your credit score. Remember, a lower credit score can mean having to pay a higher interest rate on your credit cards or any loan, including a mortgage. If you discover and dispute an error, and you win your dispute, you could see an instant uptick in your credit score, which may give you more bargaining power when negotiating with lenders.
You don't need a data breach as motivation to check your credit report. Make it a part of your annual routine and take advantage of this free offer. A few minutes of your time once annually sure beats becoming one of those 52 million Americans whose credit scores could be negatively affected by an error and would never know about it.