Are you sure that the credit card bill you are paying this month in entirely correct? Was there an identity theft? Does the invoice feature unauthorized purchases? In the US, credit card fraud is becoming only too familiar with the rise of wave-and-pay features. If there were such an identity theft or an authorized payment from your credit card, how long would it take for you to notice?
Our aim is not to scare you, but to tell you how you can keep a check on your expenses and monitor all the transactions. Opting for a credit report at least once in 12 months is very important for ensuring that your finances are in order. Moreover, you can get a free credit report every year from either one or all three of the three major credit bureaus – Experian, TransUnion, Equifax.
When should you opt for a free credit report?
How often you check the credit report depends entirely upon you and your circumstances, but according to the Consumer Financial Protection Bureau, there are certain situations, when you should check your credit report –
- If you are applying for a new job, where your employer checks your credit or financial history
- When applying for a loan, since its interest rate will depend on your credit record
- If you want to reduce the risks of identity theft, or if you suspect unauthorized purchases on your account
- It is inexpensive – if you are opting for one report per year, any of the three credit bureaus are likely to give the credit report to you for free.
- It is a simple process – you can readily access and download your report as long as you are on the official site. You can download it online, or request for a mail update. The latter takes about 15 days to arrive at your doorstep.
- It is quick – you should not require more than five minutes to sign up, verify your account, and access the report instantly upon answering a few security questions.
You should always review your credit report since it might contain instances of late payment that did not occur. Or, it might have substantial transactions that you have not made. Upon such indiscretions, you have the right to talk to the credit bureau and clear things out before you apply for your new job or a new loan.
Why should you opt for a free credit report?
Even when you don’t have such pressing needs, you should try to monitor your credit report and credit score for the following reasons –
What's the difference between the credit report and credit score?
Now, a lot of consumers have asked us this question – "what is the difference between credit scores and a credit report?" it is a fundamental question that can further help you understand your financial status and eligibility for new loans.
Credit score – your credit scores are the 3-digit numbers that hold the key to your financial status. It summarizes the credit report, and it tells your potential lenders how risky it might be to lend you money.
Credit report – it has all the details you or your lender or employer needs to know about your credit activities. It includes the information about your open and closed lines of credit, payment history, and detail of your accounts.
Soft inquiry vs. hard inquiry: how do they affect credit scores?
Another question that bothers the consumers most is whether checking their credit report can hurt their FICO score. Well, when you check your credit score or credit report, it does not affect your FICO score negatively. However, when a lender checks your score, mainly after you have applied for a credit card or loan, your scores might go down by a couple of points. That brings us to the topic of soft inquiry vs. hard inquiry.
What is a soft inquiry?
When you check your credit score via the genuine credit bureaus, it falls under the category of soft inquiry. Even when a company performs a credit record check as a part of their background check, it is a soft inquiry or soft pull. All soft inquiries are only visible to the account holder when he or she performs credit checks. All pre-qualified credit card and insurance offers are soft queries that do not harm your credit score. Employment verification of credit scores is other forms of soft pulls that have zero to negligible effect on FICO scores of the applicant.
What is a hard inquiry?
The hard inquiries or hard pulls include the credit checks that financial institutions or potential lenders perform. Hard inquiries happen only when a person applies for a loan, mortgage, or a new credit card. The consumer has to authorize such hard inquiries since it affects the FICO score. According to the observation of financial experts, when an institution performs hard inquiry once, it hardly affects the credit score of the consumer. The damage usually disappears even before the sanction of the new line of credit.
Any hard inquiry is likely to stay on your credit report for two years. Hence, monitoring your credit report can also tell you if anyone performed unauthorized inquiries on your credit record. It can give you the chance to redeem the lost points and reinstate yourself as a low-risk borrower.
The other credit checks that typically appear on credit reports include cable, internet, utility, and cell phone service providers' inquiries into your credit status. Unless you are sure about the nature of an inquiry, you should speak with the relevant company or your credit bureau for more information on its impact on your credit score.
We are living in a time when identity theft has become rampant in the US. As of reports from 2018, there were around 16.7 million victims of similar crimes across all 50 states. Monitoring your credit score and credit report can be one way to spot identity fraud in its nascent stage and stop it before any significant harm. Keeping a close eye on your credit report, at least once every 12 months can provide you with vital clues to spot identity fraud on your credit card, and report transactions that you have not made in the past.