4 Simple Ways to Keep an Eye on Your Credit
In the wake of the Equifax data breach, many Americans are rightfully concerned about their credit. Will someone be using their identities to take out loans? The fact that there's wildly different advice from different sources makes things even more confusing.
In any situation where you feel uncertain about your credit and your identity, it's a good idea to step back, take a breather and get back to the basics of simply keeping an eye on your credit. Not only is managing your credit a really good way to make sure that identity thieves stay away, it also helps ensure that you're going to be able to get loans when you need them, be eligible for lower insurance rates and qualify for the other little perks that come with good credit.
Here are four steps you can take to always keep an eye on your credit and ensure that it's healthy.
[See: 10 Ways to Protect Yourself From Online Fraud.]
Keep your bills paid and don't let your credit card balances grow. Believe it or not, your ordinary bills are one of your most powerful windows into your credit. Simply having your bills up-to-date and not carrying a large balance on your credit cards (small balances are OK) is enough to ensure that your credit is in pretty good shape, as those two factors are crucial elements in determining your credit score.
This part is as simple as can be. Just keep your bills paid. Don't fall behind on them. If you can't pay off your credit cards in full, at least make sure to make minimum payments on them and keep the balance well below your credit limit.
If you can do that, you're guaranteed to have a strong credit foundation, regardless of any mishaps or anything else that happens, as those things are generally fixable. Having strong credit to begin with makes it easier to identify actual credit problems, fix those problems and recover from them.
[See: 9 Financial Tools You Should Be Using.]
Get your free annual credit report each year and review it. The Fair Credit Reporting Act requires each of the three major credit bureaus to provide a free copy of your credit report each year upon your request. These credit reports provide a direct look at your credit and can quickly help you identify whether or not you've got incorrect marks on your credit report that are dragging down your score.
Here's the catch: A bunch of businesses have jumped onto that bandwagon and bundle your actual free credit report with a bunch of their own paid services that you don't need and likely don't even want.
The only place that the Federal Trade Commission has sanctioned to give you your credit report directly for free is annualcreditreport.com. At that site, you can access your credit report from each of the three credit-reporting bureaus every year and see for yourself what information is on them.
It's a good idea to not access all three at once. Instead, examine your report from one bureau, then return in four months to examine your report from a second bureau, then return four months later to examine your report from a third bureau. After that, you can cycle back to the beginning. All of these reports are free -- they're your right as a citizen, so take advantage of them.
If you do find something incorrect in your credit report, track it down. Contact the company or organization that placed that incorrect information and see what needs to be done to have it fixed.
Review your bank statements and credit card transactions. Another nefarious way that your credit can be tainted via identity theft is if a hacker gains access to your credit card or to your bank account (often via a debit card). Often, the hacker will run small transactions through that account that won't set off any red flags and won't get noticed unless you pay attention.
The best way to detect this is to sit down with your monthly credit card and bank statements and review them transaction by transaction. If you see transactions you can't identify, spend some time figuring out what they are. Contact the credit card company or your bank and ask about that transaction in detail.
If you find transactions that you didn't authorize, cancel your card and have a new one issued for the account. It's likely that someone has unauthorized access to the account through your card. If it's a bank account, talk to your bank about sensible next steps to take, as the breach may be affecting other accounts and may not necessarily involve your card.
[Read: How Consumers Can Protect Their Online Privacy Right Now.]
Ask for your credit score when you're actually using your credit. Many people want to know their credit score, as it is a good description of the relative health of one's credit. Unfortunately, many services that allow you to see your credit score show estimates or bundle them with expensive packages.
One way to get around that is to simply ask to see your credit score when you're in a situation where your credit score might be accessed or calculated, such as when you're applying for a loan at a bank or credit union. Quite often, the financial institution will share that information with you at the end of the process of evaluating your application.
Credit scores aren't necessary information, but they do provide a useful summary of your credit history. If your score is lower than you expect, then you know it's time to start doing some financial detective work.
Keeping an eye on your credit doesn't have to be a full-time job, nor does it have to be an expensive process. Most of the tools you need are free and easily available. The key part of the equation is you -- you have to sit down, go through those reports and see whether anything is amiss. Good luck.
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