Why Is Checking Your Credit Report Important?

Each year, all American consumers are entitled to one free credit report. The reason you are entitled to this free credit report is to promote consumer examination of their personal credit reports. If you had to pay for it, you may be less inclined to check your report. There are a variety of reasons why you should check your personal credit report.

Your Credit Report

AnnualCreditReport.com is the only site that offers the free annual credit report provided under federal law. When you log onto the site, you are asked to fill out your information and you are then asked a series of questions that only you would know. These questions are designed to verify your identity. Your credit report contains your personal information, any potential negative accounts, accounts in good standing, any requests made for your credit history, any messages from the credit bureaus and the credit bureau's contact information. All of the accounts on your credit report contain the name and address of the business you transacted with and the date and the amount of the transaction. If you had a loan or credit card, the report shows the dates of your payments, if the payments were late and if they were late payments, how late the payments were made (i.e., 30 days or 60 days late).

Accuracy of Information

Checking your credit report ensures the accuracy of the information on your report. The companies you are transacting with have thousands, even millions of other customers. Although unlikely, it is possible that your information could be reported inaccurately. If you know that your credit card payment was on time in June of 2009 and your report shows the payment as 30 days late, you can contact the credit card company and attempt to fix this error. If you have proof, such as a bank statement or a receipt of your payment, this will help correct the error.

Your Identity

You should always check your credit report is to ensure your identity has not been stolen. If you see there are errors on your credit report, it may be more serious than a reporting mistake. If you see a variety of purchases made around the same time period, or any purchases that you did not make, your identity may have been stolen. If your identity has been stolen and the thief has made purchases, the FTC advises you take four steps. First, review your credit reports from all three bureaus---TransUnion, Experian and Equifax---and place a fraud alert on your credit reports. Second, close all of the accounts that you believe the thief has accessed. When you call and close the accounts, let the companies know that your identity has been stolen. Then, file a complaint with the FTC. Finally, file a police report.

Debt and Credit Management

Another reason to check your credit report is to manage your credit and your debt. Your credit report serves as a summary of all of your old and outstanding debt, all of the payments you have made to your accounts and any credit inquiries. Instead of going through all of your accounts separately, you can check your credit report and have all of the information in one place. This way, you will know where you stand and where you need to focus your time and resources if you want to eliminate your debt and improve your credit.