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When we think about the things that make for interesting reads, we may be drawn to our favorite books, magazines, and blogs. Credit reports, not so much. But while reviewing your credit reports may not seem like the most fun way to spend a chunk of your afternoon, it's important that you do so before 2020 wraps up. Here's why.
1. You may have fallen victim to fraud in the course of your holiday shopping
A lot of people do extra shopping during the holidays. If you used your credit cards to make purchases online and in stores, there's always the risk that your data got into the wrong hands, and that someone's been making charges and racking up a huge balance in your name. Checking your credit reports, however, will alert you to unusually high balances on your cards. In fact, your credit reports will allow you to see your credit utilization ratio, which is the extent to which you're using your available revolving credit. If you notice that ratio is higher than expected, it may prompt you to dig deeper.
2. You may have an erroneous debt listed in your name
Credit report mistakes are fairly common, with an estimated 1 in 5 consumers having an error on at least one report. One of your reports could have a debt in your name that you never racked up, or one that you did legitimately accrue but have since paid in full. And if you spot that mistake and work to get it corrected, you could see your credit score increase fairly quickly. That's particularly important if you plan to apply for a mortgage in the new year, or any other type of loan.
3. You want to start 2021 with a clean slate
Many people pledge to kick off the new year with healthy financial habits -- more saving, less spending, and better budgeting. If that's your goal, then checking your credit reports now is important, because they'll give you a sense of whether your existing debt is healthy or whether you need to take steps to lower it. Your credit reports might also reveal harmful patterns you need to work on -- for example, not paying bills on time.
Access your credit reports today
Normally, you're entitled to a free copy of your credit report once every year from each of the three major reporting bureaus -- Experian, Equifax, and TransUnion. During the coronavirus pandemic, however, you're allowed to request a free copy every week.
For the most part, there's no need to go to that extreme. Checking your credit reports once every few months is more than acceptable when it comes to keeping tabs on your credit. But if you're expecting a change to your credit report -- say, you've reported an error and are waiting to get it corrected -- then you may want to check more frequently.
Either way, don't put off reviewing your credit reports until 2021. The sooner you access the information they contain, the sooner you'll be able to fight back against fraud, correct problematic errors, and understand how healthy your general financial picture looks.