A New Year, a New Chance to Review Your Credit

Many people change batteries in smoke alarms when the clocks move forward or back. Perhaps you might try the New Year’s holiday to spark a new tradition, checking your credit report. The process is free, simple and could be an easy way for you to accomplish an easily achievable New Year’s resolution.

If you have ever had a credit card or a loan, or especially if you have ever been turned down for one, then you probably know the impact a credit report can have on your finances. Each creditor provides information about your credit standing, whether you have any late payments and how delinquent they were, and whether you have had any accounts closed by you or your creditor. There might also be information from collectors if you have ever had a utility, bank or other kind of account go to collections.

Federal law allows you to get one free report from each of the three major credit reporting agencies each year. The first place to start is www.annualcreditreport.com, the federally authorized site where, within minutes, you can see reports from all three agencies. Those reports will not include your credit score, the number some creditors use to determine whether you are a good credit risk. Issues that affect your score include how well you make payments, how much debt you have compared to the total credit line and how many accounts you have. Credit scores are available for a small fee.

When you see your report you should check for errors in the spelling of your name and other mistakes you notice, such as how your account is shown. Report any errors in writing to the credit agencies.

Another important thing to look for is evidence of fraud. If you question the validity of information you find, you will first want to look closer at your accounts, either from the paper statements you have received from your creditors or online. If you find accounts you did not authorize, it’s possible someone has stolen your identity and is using it to buy goods with your credit. This can become a huge problem, because people stealing identities don’t concern themselves with making payments, potentially sending your credit into a tailspin. If you notice fraud, complete the Federal Trade Commission’s Identity Theft Victim’s Complaint and Affidavit.

Once you have completed all your work on this year’s credit report, keep it on file to have it handy throughout the year in case there is an issue. Then, next year when you get a new report you can compare your reports year to year. Checking the report annually also makes it more likely you will have an accurate credit history the next time you apply for a loan.

If you have questions about items on your credit report or about the process itself, contact a credit counselor to ask for assistance. A counselor will be able to address many of your concerns, help you navigate the site and give you the information you need to feel knowledgeable about your report.

Published Dec 18, 2013.