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Your credit reports can bring to light early warning signs of fraud or errors that could impact your credit score — but only if you know where to look.
Your credit reports can bring to light early warning signs of fraud or errors that could impact your credit score — but only if you know where to look.
In this article:
In this article:
Your credit reports include important details about your credit accounts and actions, such as your payment history, account statuses, and credit inquiries. Your credit account information won’t only help you keep track of your financial health and credit score — it can also highlight mistakes, errors, and even fraud.
If you're not reviewing your reports from all three major credit bureaus — Experian, Equifax, and TransUnion — at least once per year, you might not detect signs of identity theft until it's too late.
The good news is that every American is entitled to free online copies of their credit reports each week from all three bureaus at AnnualCreditReport.com.
However, if you think you might be vulnerable to identity fraud or are planning a large purchase in the near future, you should consider signing up for a credit monitoring service that will monitor your reports for you and alert you as soon as any changes occur.
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Almost everyone should be running personal credit checks once a year to look for mistakes — or even just to review their free credit scores.
However, you should be checking your reports much more frequently if you fall into one of the following groups:
Checking your free credit report won't hurt your credit either, as it's considered a soft inquiry (and not a hard inquiry resulting from a credit application).
Here are some of the key reasons why you should start checking your credit reports right away.
Before you make any major financial decisions — such as applying for a mortgage, auto loan, or even a credit card — you want to get an idea of what lenders are going to see when they look at your credit report.
A good credit score will ensure that your application gets approved, but it will also help you secure more favorable lending terms and interest rates.
Check your score early enough in advance so that you can make the necessary changes or repair your credit before applying. In particular, you want to look for things like negative information in your payment history or your debt-to-income ratio. At the very least, reviewing your credit report will arm you with information to help in any negotiations that might take place.
Example: You want to apply for a new car loan but aren't sure that you’ll be approved for the financing you need. When you pull your credit report, you see a few late payments on an old credit card that you had forgotten about — dragging down your credit score.
You decide to wait a few months and pay your bills on time to improve your credit history before applying so that you can get the best rate possible.
Criminals can use stolen or leaked information to open new accounts or take out loans in your name. Unless you’ve enlisted the help of a credit monitoring service, you’ll be responsible for protecting your credit file against identity thieves.
Regularly checking your credit report may not prevent fraud, but it will make fighting and recovering from it much easier.
Fraudulent activity can take many forms on your credit report, but here are a few common red flags to look for:
Example: You notice a recent hard inquiry on your credit report, but you know that you haven't applied for any new credit in over a year. The lender who made the inquiry claims that a loan application was filed in your name.
You inform the lender of the fraud, quickly freeze your credit with all three bureaus, and report the identity fraud to the Federal Trade Commission (FTC). These steps can effectively shut down the scam before it has a chance to cause serious damage.
📚 Related: What Is Credit Monitoring (and Do You Need To Pay For It)? →
It's not only fraud that can hurt your credit score. Sometimes, unintentional mistakes are made by lenders, credit providers, or credit reporting agencies which can lower your credit rating. Possible inaccuracies may include:
Depending on the situation, you can dispute errors formally with the credit reporting agencies or have them fixed by the information furnisher directly. While these types of mistakes don't typically have lasting effects, they can make a big difference in the short term.
Example: You plan to shop around for better auto insurance coverage, so you request a credit report to see where you stand. You spot a student loan account listed as open even though you paid off the remaining balance months ago.
Before you start contacting insurance companies for quotes, you call the student loan lender and have them update your file with the credit reporting agency, which leads to better rate offers.
When a new credit account is first entered into the lender's system and reported to the credit reporting agency, it may include errors that can lower your credit score. Some potential errors include:
If you catch these mistakes early, they can usually be fixed quickly and easily. In most cases, the lender will make the necessary changes without needing any further action from you.
Example: You successfully apply for a new credit card with a $5,000 limit, and use $500 of it. When you pull your credit report to ensure that everything looks as it should, you see that the credit card's limit has been misreported as $500. This puts your credit utilization at 100%, instead of the 10% that it should be. You fix this issue with the bank before it affects any future loan applications or interest rate decisions.
Regularly reviewing your credit report does more than just identify credit-damaging errors and fraud. This process can educate you about factors that impact your credit score and help you make more informed decisions that align with your financial goals.
When reviewing your credit reports, pay attention to trends in your credit utilization and payment history and how they affect your credit scores from month to month. Create actionable goals, such as paying off your highest-interest debt first and bringing your credit utilization to between 1%-10% — the ideal range for most lenders [*].
Example: You plan to buy a house at some point in the future and want to set yourself up for success. You start monitoring your credit to stay on top of your debts and keep your credit utilization within the optimal range.
When it comes time to apply for a mortgage, you're financially stable and your track record of timely payments and smart credit usage makes you an ideal borrower and a strong candidate for low rates.
Credit reports summarize your credit history in a fairly straightforward manner, but you should know what each section means in order to read and review it properly.
Here's a brief description of the credit information you'll find in your reports:
📚 Related: How To Read a Credit Report (and Dispute Errors) →
Credit scores are three-digit numbers that represent your creditworthiness. The higher your score, the better your chances of qualifying for new credit, loans, and lower interest rates.
Though credit scores are based on the information contained in your credit report, they don't actually appear in the report itself.
In fact, you can have many different credit scores depending on the model used (for example, VantageScores® vs. FICO® scores) and purpose of the credit application. For example, credit card lenders may place more emphasis on credit usage and payment behavior, whereas home and auto loan lenders focus more on stability and debt-to-income ratios.
Credit scores are calculated by using various credit report details, such as:
Errors in your credit report can impact your credit score and financial health, but all damages are reversible if you act accordingly.
If you spot an error in your report, follow these steps:
Keeping a close eye on your credit report has never been more important. According to the Identity Theft Resource Center [*], there were nearly 1,400 data breaches affecting over one billion victims in just the first half of 2024 alone.
While you can (and should) regularly order a copy of your credit report and look for changes and suspicious entries, committing to this time- and energy-consuming process isn't realistic for everyone.
If you can't find the time, don't put it off. Assign the task to a reputable credit monitoring service like the one provided by Aura.
Every Aura plan includes:
Aura's all-in-one protection packages also include 24/7 access to U.S.-based certified customer support and fraud resolution specialists, plus up to $5 million in identity theft insurance.
Editorial note: Our articles provide educational information for you to increase awareness about digital safety. Aura’s services may not provide the exact features we write about, nor may cover or protect against every type of crime, fraud, or threat discussed in our articles. Please review our Terms during enrollment or setup for more information. Remember that no one can prevent all identity theft or cybercrime.