Why the Pandemic Means You Should Check Your Credit More Often

Take time to make sure your credit report has not been impacted by the events of the past year.

Traditionally, the rule of thumb was that we should check our credit reports at least once a year. However, things have changed, thanks to the pandemic. Among the changes due to COVID-19 is how often we should pull our credit reports from one of the three major credit bureaus -- Experian, Equifax, and TransUnion.

Here, we'll discuss why we should be checking our credit reports more often, particularly after a year that included deferred payments.

Faulty reporting

It's been 15 months since news broke regarding the global pandemic. That's 15 months of adapting to a new normal that included more than half a million American deaths, a record number of job losses, and uncertainty all around.

As businesses shuttered and Americans filed for unemployment, lenders across the country began to offer breaks to customers who had trouble paying their monthly bills. For some borrowers, lenders temporarily lowered interest rates and monthly payments. And for millions of Americans, assistance came in the form of payment deferments. For a set number of months, customers could skip payments -- without fear of penalty.

Given the number of breaks lenders granted during that time, it may come as no surprise that mistakes were made. Temporary changes to repayment terms were not supposed to be reported to credit bureaus as late or missed payments, but some were. ABC reported as early as last summer that consumers began to complain about credit scores hard hit by inaccurate information.

Reason #1 to check your credit report more often: Any agreement you came to with creditors may have been mistakenly reported to credit bureaus as missed or partial payments. Check your credit report for inaccurate information.

An imperfect system

Before COVID-19, 1 in 5 Americans who checked their credit reports found at least one mistake, according to a study by the Federal Trade Commission. That was before millions of Americans were out of work, businesses sat idle, and financial hardship kicked in.

Reason #2 to check your credit report more often: There have always been mistakes on credit reports, even during the best of times. Given the number of Americans who have needed assistance with bills over the past 15 months, it's fair to assume that more mistakes have been made. Make sure none of those mistakes show up on your credit report.

The potential cost

Let's say you agreed with your auto lender to three months of deferred payments. Rather than notify the credit bureaus that you've deferred payments, the lender accidentally reports each payment as "missed." Depending on how high your credit score was to begin with, missing payments could drop it dramatically.

In terms of costs, that could mean the difference between landing a loan when you need one and having your loan application rejected. It could mean paying more interest on a mortgage, an issue that can cost thousands of dollars over the life of a loan. A hit to your credit score could also lead to losing out on a job you want or not being able to qualify for a credit card you need.

Reason #3 to check your credit score more often: Anything that drags your score down robs you of opportunities offered to borrowers with high credit scores. It's up to you to make sure that everything on your credit report is up to date and accurate. Fortunately, it's easy to do.

How to check

You can order a copy of your credit report from all three credit reporting companies by filling out a quick form at AnnualCreditReport.com. According to federal law, you are eligible for a free report once a year. Due to the pandemic, though, Equifax, Experian, and TransUnion are offering free weekly credit reports. Check yours often enough to make sure no mistakes slip in.

Whether mistakes to your credit reports are due to the lender’s errors in reporting or because the pandemic caused you to fall behind, it pays to know what you're dealing with. Once you've disputed errors and followed up to make sure they're removed from your report, it's time to work on rebuilding your credit. The process takes time and effort, but the payoff is more than worth it.