“How often should I be checking my credit reports?” I get that question all the time. In truth, there is no one correct answer to this question, though some recommendations are certainly going to be better than others. Let’s explore the different options so that you can determine the right course of action for you.
The information that shows up on your credit reports can certainly have a significant influence on your life, but you might wonder how and why the information gets added to your credit reports in the first place. Are lenders and others legally required to report your account history and other information to the credit reporting agencies (CRAs)? Are the CRAs required to add the information to your credit reports? Maybe…maybe not.
Just like you watch the number on the scale whenever you are trying to lose weight, if you are trying to improve your credit then you are probably watching your credit scores closely. Credit scores can be a useful way to track your progress whenever you are making strides to improve your credit reports. However, just because you pay off an account or you get a creditor to agree to correct an error on your credit reports does not mean your credit scores are going to update immediately. In fact, it may sound crazy but your credit scores do not actually update at all.
It seems like practically every week there is a new story about another company that has been the victim of a hacking crime. If you have not already been the victim of a data breach or had your personal identifying information compromised in some other way, it is really only a matter of time. Identity thieves do not discriminate. Everyone is a potential target.
Imagine the following scenario…you budget and work hard to pay off your credit card debt because you understand that doing so will save you money and will likely help to improve your credit scores. After months of dedication you finally reach your goal of zero credit card debt. However, when you check your credit reports the next day you are surprised to learn that your credit card account still shows an outstanding balance. Is this a mistake? Why is your new zero balance not showing up on your credit reports?
It’s called prioritization! Whether you received a big tax refund, an inheritance, or a bonus, if you have recently come into a lump sum of money you may be ready to start chipping away at your debt. Of course, if you are like most people then even an unexpected influx of cash probably will not be enough to completely wipe out all the debts you owe. The question therefore becomes, which debts should you tackle first?
If you are like most people, the truth is that you probably never planned for your debt to go unpaid and spin out of control. You signed a promissory note or otherwise agreed to a lender’s terms. Your intention was to make every payment on time and to satisfy your debt in full. And then…
Are you cautious about allowing anyone to pull your credit reports because you do not want your credit scores to be damaged by the so-called “hard” inquiries? If so, give yourself a pat on the back. The fact that you are concerned about avoiding any potential damage to your credit shows that you are a conscientious consumer who is trying to make the right choices where your credit scores are concerned.
Your credit scores can affect a lot more than just your chances of credit approvals and the interest rates on your next loan or credit card account. In addition to lenders and credit card issuers there are also many other types of companies and service providers which rely on credit information to help them predict risk. One such type of company which will routinely check your credit before doing business with you is your insurance provider.
Even if you are unsure about the behind the scenes mechanics, you probably have at least a basic understanding about how credit scores work. You likely know, for example, that paying your bills on time is an important part of earning and maintaining good credit scores. You likely also understand that negative events such as late payments, bankruptcy, foreclosures, and collection accounts can hurt your credit scores.