is it time to monitor your credit?Your credit is the precious lifeblood of your financial health. While many people are familiar with this fact, a lot don’t seem to manage their credit accordingly. Managing credit doesn’t simply mean building good credit and developing a set-and-forget mentality toward credit reports and scores. Even if your credit is excellent, you’ll need to dutifully monitor it to ensure it remains so, as there are lots of things that could hurt your credit if you’re not watching it carefully. Read below as we elaborate on the reasons why you’ll want to at least keep an eye on your credit as often as possible.

Your credit reports might have inaccuracies

While being responsible with credit is a very important aspect of improving and maintaining your credit scores, it can be easy to overlook the role that reviewing your credit reports might also play in building good credit. Below are all the reasons why you should review your credit reports as frequently as possible:

1. The credit reporting process can produce errors. This is something we’ve talked about before. Although credit report errors are fairly common, the exact percentage of consumers with reports containing errors is not known. Estimates by groups like the nonpartisan Policy and Economic Research Council and the FTC put the number somewhere near 20%. Keep in mind that percentages as low as 5% or even 1% still mean that millions of credit reports would have errors. It should be noted that not all credit report errors are ones that will impact your credit scores. That said, the only way to know if your credit reports have errors (or if they impact your credit scores) is to check your credit reports and confirm everything is accurate. If you do spot an error, you should know that your credit report disputes can be rejected, which is why you’ll need to follow up with the credit bureaus and monitor your credit reports after your dispute has been filed.

2. Identity theft can wreak havoc on your credit reports. Identity theft, scams and data breaches are all things we talk about often and require no primer. Still, it’s important to be aware that identity theft and data breaches can not only impact anyone, but they can also result in fraudulent accounts on your credit reports, which is why it’s important to be aware of what’s on them and keep on your toes when it comes to protecting your credit.

Keep in mind that your credit can be viewed by anyone at any time. While many know that credit is used to evaluate your risk as a borrower, the use of credit as a metric pops up a lot more than people might realize. For example, landlords might use credit reports as part of the criteria for evaluating your potential tenancy. In addition, while poor credit might not prevent you from obtaining auto insurance or utilities, you might end up paying more for most of these services should your credit be seen as less than favorable. This makes it extremely critical that you ensure your reports are free of inaccuracies.

How frequently should you monitor your credit?

Ideally, it’s best to monitor your credit year-roundcredit monitoring services can help you do that by providing you with alerts if something is changed or added to your credit reports, but if this isn’t feasible, the following circumstances are critical opportunities to take at least a quick a peek at your reports:

  • Yearly. The Fair Credit Reporting Act (FCRA), which we’ve talked about at length, allows you to legally obtain a free copy of all three credit reports (Experian, TransUnion and Equifax) once per year through AnnualCreditReport.com. At the very minimum, this is how often you should review your credit. It’s important to note that the FCRA also grants you free access to see credit reports in other circumstances, as well. You should familiarize yourself with these circumstances so that you can take advantage of them whenever possible, especially if you only plan to monitor your credit once per year, because anything can happen within that time frame.
  • After any data breach or if you’re a victim of identity theft. Checking your credit reports after a data breach is good advice since your information could end up on the Internet black market or elsewhere. Similarly, if you fall victim to identity theft — regardless of the type of identity theft — you’ll want to not only check your credit reports, but also follow the steps detailed in this post and consider freezing your credit to prevent any future fraud from showing up on your reports.
  • After any major life change. If you’re having a child, getting married, moving, starting school, applying for work or undergoing any other major life changes that (typically) result in some form of paper trail, you should consider investing in either identity theft protection or credit monitoring. That’s because these live events require you to pass along a lot of your personal information to someone else and trust that they will store the information securely. By monitoring your credit reports during such times, you can be sure that you’re aware if the information is misplaced and you can take immediate action if your information winds up in the wrong hands.

For more information about monitoring your credit and building good credit habits, keep reading our credit monitoring blog.