Your credit is one of your most important assets in this day and age. It's also vulnerable to identity theft; credit reporting errors; and simple misunderstandings that can damage your credit and adversely impact more than just your ability to borrow money. It's important to monitor your credit and correct any problems you can as quickly as possible. Here's how...
Check Your Credit Report
A credit report is a compilation of your credit history compiled from data submitted by lenders with whom you have done business. Your credit history data is typically submitted to three major credit reporting agencies: TransUnion, EquiFax, and Experian. Many entities besides lenders check your credit report for various reasons.
You car, life, health, and liability insurance premiums are determined, in part, by your credit report. The insurers seem to have found that bad things don't happen as often to people with better credit reports, so they get lower premium payments. Employers often check your credit report as part of a background or reference check. Renting a house or apartment typically involves a credit report check; after all, you're borrowing a year's rent and promising to pay part of it each month. If something mars your credit report, your life can become very expensive and anxious.
Unfortunately, credit reporting errors are common and can have an adverse affect on you. You may pay more for insurance than you should, without even knowing it. You may have trouble getting a loan, securing employment or contracts for your business. You may see sudden hikes in the interest rates on your credits cards and mortgage. The police may even come inquiring about certain fraudulent transactions that you know nothing about.
Do You Need a Credit Monitoring Service?
The longer you have bad credit, the more time and trouble it takes to fix it. So you should monitor your credit report regularly and take immediate action to correct any errors in it that you can. For starters, you are entitled to a free credit report once a year.
U.S. law requires the three major credit reporting agencies to send you a written copy of your "credit file disclosure" (credit report) at least once a year. You can request this credit report at AnnualCreditReport.com, a site the credit agencies jointly operate. Be prepared, when you file your request, to be pressured to sign up for fee-based monthly credit reports and other credit monitoring and emergency services. The agencies try to make money while satisfying their legal responsibilities, but of course you're under no obligation to give them a penny.
Since there are three credit reporting agencies, and each will give you one free report per year, my advice is to request one report every four months, to keep tabs on your credit. But there are subscription-based credit monitoring services that let you check your credit report online, as often as daily if you really want. Some will send a written report monthly. Some will automatically take emergency measures to protect your credit if suspicious activity occurs on your credit history. For instance, a credit card you've registered will be frozen, unusable, if it suddenly appears to be buying thousands of dollars worth of electronic equipment hundreds of miles from your billing address. The monitoring agency will block further transactions and notify you via email, SMS message, voicemail, and/or snailmail. If your wallet is stolen or you believe someone is fraudulently using your identity and credit, one phone call will instruct the monitoring service to freeze all of your credit cards, and even bank accounts.
It may sound like a good idea to sign up for credit monitoring and emergency services. But some people argue that they can actually damage your credit. The theory is that credit reporting agencies may assume that frequent credit checks reflect your attempts to obtain more credit, so you must be in bad financial shape and about to default on your current debts. But since the credit reporting agencies themselves offer these monitoring services, I tend to think they are more benign in that respect.
On the downside, credit monitoring services can cost hundreds dollars a year, and they really don't give you much that you can't get for free or very inexpensively. Even if you've gotten your free annual credit reports, you can still purchase additional copies at any time for under $10. In my opinion, fee-based credit monitoring services are a poor investment, unless you've already been a victim of identity theft, and there's a real possibility that further damage might occur.
Do you have something to say about credit reports, or credit monitoring? Post your comment or question below...
This article was posted by Bob Rankin on 19 May 2010
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Article information: AskBobRankin -- Credit Monitoring (Posted: 19 May 2010)
Copyright © 2005 - Bob Rankin - All Rights Reserved