Home > Credit Score > 5 Reasons to Monitor Your Credit

Comments 0 Comments

You’ve probably heard that it pays to stay on top of your credit, but how often does a person really need to pull their credit report?

According to Katie Ross, education and development manager for American Consumer Credit Counseling, at the very least, everyone should take advantage of the free credit report they are entitled to each year. However, generally speaking, she suggests checking your credit report and score every six months or so to make sure you’re in good standing. You can also check your credit score and credit report profile for free as often as you want using Credit.com’s Credit Report Card.

There are also instances where a credit check (and even subsequent monitoring) is particularly important. We break down a few of them.

You Need to Know Your Identity has not Been Compromised

If your credit card and/or other personal information has been compromised due to a data breach, it’s definitely a good idea to pull your credit report. For starters, it can show whether someone has fraudulently used your data.

“Check to see who’s been looking at your credit,” Bruce McClary, director of media relations for ClearPoint Credit Counseling Solutions, says, referencing the inquiry section. Hard inquiries stemming from loan applications you yourself did not fill out are often “early clues” your identity has been compromised, he adds.

If you discover you’re a victim of identity theft, it’s a good idea to monitor your credit while the situation is being sorted out so you can report damaging and fraudulent information as it appears.

“You can also add a fraud alert to your credit report,” Ross says.

You’ve Never Done so Before

Fraud is definitely one reason why credit newbies should finally go ahead and pull that report, but it’s certainly not the only instance where what you don’t know can hurt you. Studies have found as many as four in five credit reports actually contain errors on them and 25% of these mistakes can be egregious enough to cost someone a loan. Not all errors are related to fraud.

“There are people that are inputting data and they can make mistakes,” Ross says. “If that happens you need to make sure you address the problem.”

Catching mistakes close to when they appear is especially important since some errors aren’t so easy to fix. You can find more information on how to dispute information with the major credit bureaus in this article.

You’re Getting Ready to Shop Around for a New Loan

It’s always a good idea to pull all three versions of your credit report (with the scores included) right before you go shopping for a new loan or line of credit. This will preempt any unwelcome surprises.

“The last place you want to be surprised about your credit score is when you’re closing on your home,” McClary says. (Many mortgage lenders will conduct a second credit check right before the house changes hands, and fluctuations in your score can affect the loan’s terms and conditions.)

It can also help you gauge whether you should even be in the market for a new loan to begin with, since low credit scores can lead to high interest rates or a rejection. While the rejection itself won’t cause your score to drop further, the inquiry associated with the ultimately useless credit pull can.

“If you are planning to purchase a home and you are in a range of 720 or more, you’re in better shape than most,” Ross says. “If not, looking for ways to improve will be your next step.”

You’ve Co-Signed a Loan with Another Individual

Co-signing occurs when a third-party helps an underbanked or otherwise unqualified borrower get a line of credit with more favorable rates by agreeing to put their name to the loan. The practice is especially common among parents who are helping their child get their first credit card, but can also be used to obtain mortgages or car loans as well.

Some people may not realize this, but co-signers are responsible for upholding the terms and conditions associated with the contract, even if they aren’t actively reaping its benefits. This means any missed payments or, worse, defaults will appear on your credit report and have a negative impact on your score. (On the plus side, the other person’s responsible behaviors can give your score a boost.)

Either way, “you want to check periodically the primary is paying as agreed,” McClary says. If they aren’t, you may have to intervene to prevent the line of credit from doing big damage to your score.

You Want to Know What You Can do to Improve Your Score

If you suspect your score is not-so-hot, it can help to request a report from one of the three major credit reporting agencies — Equifax, Experian or Trans Union. Most versions of a credit report include information of what line items are helping your score and what line items may be hurting it. This information can also give you a sense of what actions you will need to take in order to send your score upward. For instance, a report might point out your credit-to-debt ratio is too high, which means you should probably pay down any debt you’re carrying on your credit cards.

Often, reports will also break down the major components of all credit scores.

“Understand what makes your score up and learn how you can improve in those areas,” Ross says.

Keep in mind, checking your credit consistently won’t cause your score to drop. Personal pulls are considered soft inquiries and don’t appear on your credit report.

Image: drtel, via Flickr

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team