I’m fond of saying that personal finance is PERSONAL. Which, to me, means there really is no objective right or wrong way to save money, make a budget or allocate your resources.
If it works for you – it works.
But there are a few things that I think are objective. And one of those is regularly checking your credit report.
While it’s good to know your “score” and have a sense of your overall debt to income ratio, the real reason I want to urge you to check your credit report today is to detect possible identify fraud.
Identity thieves can use your name, address and social security number to open credit card accounts, take out personal loans and even start-up utility and cable accounts. They leave you holding the bill – and scrambling to prove you were a victim of a crime.
If you don’t regularly check your credit report, you won’t find out about this theft until the creditor finally turns over your account to a debt collection agency, who ominously comes knocking on your door.
Where can I check my credit report for free?
According to federal law, U.S. citizens are entitled to one free credit report every 12-months from each of the three reporting bureaus – TransUnion, Equifax and Experian. Go to AnnualCreditReport.com to get your free report.
There are also numerous sites that claim to have free credit checks, but unfortunately, most of these sites only offer the service for 7-days, after which they automatically start billing you for their “credit monitoring” service.
What kind of inaccuracies am I looking for?
According to BankRate.com, 70% of credit reports contain errors that might cause consumers to be denied credit cards, car loans and even mortgages.
In addition to the obvious – credit cards, loans or utility accounts listed in your name, which you did not open – you also want to carefully check each of your three credit reports for any inaccuracies.
First, compare the three reports – they aren’t necessarily the same. Report any inconsistencies to the appropriate credit bureau.
Next, look for any of the following errors:
- Incorrect personal information – Is your name spelled correctly? Do they have your married/maiden name? Is your address up-to-date and spelled correctly? Is your social security number correct?
- Incorrect/outdated account information - Have you closed a credit card, which they are still showing as open? Have you increased your credit limit, which can potentially affect your credit score, and they are still showing as the lower amount?
- Duplicate Mortgage Accounts - If your mortgage was recently sold, it may be listed under both the previous lender and the current one. Duplicate accounts can negatively impact your credit score.
- Phantom Accounts - These might be accounts that weren’t fraudulent, but simply inaccurately attributed to you (if the social security number and/or name are very similar). We’ve also found accounts listed on my husband’s report that were his parents. He was listed as an authorized user, but that should not show up on his account.
- Outdated issues – Most negative issues should drop off your credit report after sever years. If there are negative items dating back further than that, you can contact the credit bureau to have it removed.
If you discover any inconsistencies or inaccuracies, you need to immediately report them to the credit bureau. The Fair Credit Reporting Act requires that they be investigated and fixed within 60 days – but you need to report the errors to start this process.
Bankrate.com has a very helpful sample credit report inaccuracies letter, along with the addresses for each of the bureaus.
If you suspect that you have actually been a victim of identity theft, you can get more resources from the Federal Trade Commission’s identity theft site, along with your local police department. They will be able to better guide you through the process of cleaning up your identity.
While you are working through this, I would recommend that you put a Fraud Alert on each of your credit reports. Once you have done so, accounts can no longer be opened without double verification.
If you request this alert from one of the three credit bureaus, it will automatically be sent to the other two – and remain in effect for three months. You can extend this to a lifetime alert if and when you prove that you have, in fact, been a victim of ID theft.
Experian – 888-397-3742 (TDD 800-972-0322)
Equifax – 888-766-0008 (TDD 800-255-0056)
Transunion – 800-680-7289 (TDD 877-553-7803)
So… have you checked your credit report lately?