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Importance of Checking Your Credit Report

written by: wendyppp•edited by: Donna Cosmato•updated: 6/29/2011

As an adult, your credit report is one of the most important pieces of personal information you can have. You can't buy a home or a car without it. Staying on top of your credit report will ensure that mistakes are fixed promptly, and that you will be in the best position possible.

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    Many people probably already know the value and importance of checking their credit reports. The reason you need to check your credit reports is to ensure that you suddenly don’t find yourself in the middle of a credit problem which you weren’t aware of earlier. Identity theft is a crime affecting millions of Americans each year and is one of the biggest reasons why you should keep an eye on your credit report. You also need to check your credit reports for reporting errors that can result in one being denied a loan or a credit card. People should take every step to ensure they protect themselves from credit fraud and reporting errors. You check your credit report every year. This can be done for free. More frequent checks costs a small fee.

    The Reason Behind a Credit Report

    A credit report helps banks and lending companies identify and determine a consumer’s credit worthiness. When you apply for credit, a lender reviews your credit score or full report to determine just how good you really are at repaying loans and just how much risk is involved in lending you money. Retailers and lenders review your credit score before offering you instant credit. However, if you are applying for a major credit card, mortgage, or auto loan the lending company will ask for your full credit report.

    Credit reports usually include information relating to credit accounts, including past due accounts, balances, judgments, and collection accounts and bankruptcies. Now, based on this information, a lender will determine whether you really qualify for a loan or not. Individuals who have several negative remarks or a bad report have a lower chance of receiving credit.

    Check Your Credit Report Online

    The first step to protecting your credit rating is to check your free credit report online. Stealing someone’s information does not take long, and if you aren't vigilant, someone could assume your identity without your knowledge. A con can obtain several credit cards within a week using your name, and these accounts inevitably appear on your credit report.

    Creditors also make several mistakes - for instance, a creditor may fail to report a past due balance that you paid in full. So it is always good to check your credit report every year at least, or more often if you are considering a large purchase like a house or car, so you can detect suspicious activity and fix any inaccuracies in your report. Checking your credit report online is free and convenient; all you need to do is to enter in your name, address, and social security number and you will gain access to your report in minutes. These reports are viewable for a period of thirty days.