5 Times You Need to Check Your Credit Reports
by Kailey Hagen | Updated July 21, 2021 - First published on Oct. 10, 2019
Failing to do so could make your life difficult in ways you hadn't imagined.
Your credit reports give lenders a window into your financial history. They're the benchmarks by which institutions measure your financial responsibility and, increasingly, your responsibility in general. Checking your reports regularly is a crucial step to making sure that they portray you in a good light, and it can help you avoid some embarrassing situations.
1. When you plan to apply for new credit
Every time you apply for a new loan or credit card, the lender will pull your credit reports. This is called a hard credit check and it drops your credit score by a few points. Credit scoring models do take normal credit shopping behavior into account and consider all credit checks that take place within 30 days to be a single inquiry. If you're approved, this isn't a big deal, but if you're denied, you just lowered your credit score for no reason.
You can reduce this risk by checking your credit reports before you submit any applications to look for red flags that could get you denied, like late payments or a heavy reliance on credit. Even if you know you've been responsible with your money, you should still check in case there's an error in your report or you've fallen victim to identity theft. In that case, dispute the incorrect information and put off applying for new credit until the matter is resolved.
2. When you've been a victim of identity theft
Almost everyone has had their credit card stolen at one point or another. Most just contact their card issuer, request a new card number, and move on with their lives. But without checking your credit report, you have no way of knowing whether the thief has stolen more than your credit card number. If they managed to get hold of your Social Security number, bank account number, or financial account passwords, they could do even more damage or open up new fraudulent accounts in your name. You only discover this when you're denied a new loan or debt collectors start coming after you.
Pull your credit reports following any incidence of identity theft and check for other accounts or activity you don't recognize. Notify the credit bureaus and the financial institutions involved if you find any. Consider placing a fraud alert on your account to notify lenders that they should take additional steps to verify your identity before opening up new credit accounts in your name.
3. When you're applying for a new job or apartment
We typically think of credit reports as something that only financial institutions use, but employers and landlords are increasingly using them as well as a way to assess a potential employee or tenant's responsibility. Among employers, this practice is most common for positions in which you'll be required to manage company or client funds, but any employer can run a credit check if they so choose.
Legally, prospective employers and landlords must get your written consent before pulling your credit reports, and you have every right to refuse. But if you do, there's a good chance they'll set your application aside and move on. Better to check it yourself first and make sure it shows you in a positive light before letting a company or landlord see it.
4. When you're trying to repair bad credit
Viewing your credit reports can help you quickly see the negative factors that are hurting your credit score, and this is a good place to begin if you're trying to rebuild your credit. For example, you might not realize that a high credit utilization ratio on one of your cards is hurting your credit score until you check your report. By simply using the card less or making a payment twice per month so that the final reported balance is lower, you could begin to improve your credit.
Rebuilding poor credit often takes time, though, and there isn't anything you can do about black marks like bankruptcies or late payments on your credit reports unless you can prove that that information is inaccurate. But checking your credit reports can still help you understand how your actions affect your credit score so you can make smarter financial decisions in the future.
5. Once per year
If none of the above scenarios apply to you, you should still check your credit reports at least once per year to verify that their information is accurate. Everyone gets one free credit report per bureau per year through AnnualCreditReport.com, so cost is not an obstacle. You can also purchase additional credit reports from the credit bureaus directly or from companies offering credit monitoring services if you've already used your free credit reports for one of the above situations.
You probably won't find anything amiss when you check your credit reports, but if you do, you'll be glad you took the time to verify their accuracy. Look over your credit reports if you haven't already done so this year, or if one of the other scenarios above applies to you.
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