Credit Reports and Credit Scores: How Often Should You Check Them?
Personal data can easily be breached by hackers nowadays. For this reason, it makes a lot of sense to frequently check your credit information to ensure that all of the details are accurate and that a third party is not using them without your knowledge.
The Consumer Financial Protection Bureau in the US suggests that you should check on your credit report at least once a year. They also suggest checking it under certain circumstances. This includes before you apply for a new job, or before you take out a loan to reduce the risk of identity theft you might encounter.
On the other hand, some financial experts suggest that you check your credit report at least once a month. Moreover, you need to know that credit reports don’t usually include your credit scores; the two of them are entirely different.
How To Check Your Credit Reports
When it comes to checking your credit reports, the process can be free and easy. In fact, you can get your report yearly from each of the three major credit bureaus. This includes Experian, Equifax, and TransUnion. By doing so, you might be required to submit your basic information, answer some vital questions, and then choose the report you want.
Checking Your Credit Reports vs. Checking Your Credit Scores
As mentioned earlier, checking your credit reports is different from checking your credit score. Your credit reports present you with the details concerning your credit activity. This includes your payment history and the open and closed accounts.
On the other hand, your credit score is a three-digit number calculated using the information presented on your credit reports. Moreover, credit scores are developed to help lenders assess the risk you have as a borrower. Also, from a lender’s point of view, the higher the credit score, the less risky you are as a borrower.
Your credit score is a reflection of whether or not you have been responsible with your finances. Furthermore, checking up on your credit score is a great way to spot potential mistakes or even theft in your credit reports. If you noticed that your credit score dropped unexpectedly, something might not be right. When this happens, it would be best to monitor your credit report to know what might be wrong.
Does Checking Your Credit Report Hurt Your Credit Score?
Lucky for you, when you check your credit report yourself, it will not hurt your credit score. Doing so is called a soft inquiry. On the other hand, when a lender checks your credit report (usually because you applied for a loan or a credit card), your credit score might lose a few points. This is called a hard inquiry, and it impacts your credit score since hard inquiries usually mean you are taking a new financial responsibility.
How Often Does Your Credit Report Update
Your credit report will then be updated with new information every time your lender reports your credit and loan activity to any or all three major credit bureaus. However, this is not done in real-time.
To ensure the lender’s data are valid, the credit bureaus usually have a certain process to help with that. This process most likely takes several hours or even days to complete. Moreover, if the credit bureau thinks that there is an error in the lender’s given information, they will verify it first before it will reflect on your file. This is why most of the time, there is a delay in updating your credit reports.
Lenders usually report your financial information at least once a month. Once the new data is added to your credit report, you will also produce a new credit score. Furthermore, even a slight change in your credit report might also change your credit score.
How Often Do Lenders Report to Credit Bureaus?
The answer is, it depends. Several lenders, especially credit card issuers, report to the credit bureaus at least once a month. Moreover, the day they report your financial information most likely concurs with your credit card statements’ closing dates.
It would help to know that other lenders might report to credit bureaus less often. Besides that, not all lenders report to the three major credit bureaus. Moreover, if you want to be sure, you can communicate with your lender and ask which bureaus it reports to.
Reported Information That Can Lose Some Points On Your Credit Score
Credit bureaus tend to collect different types of information concerning your credit accounts. This includes your credit limit, reported balance, and payment history. The following are some of the reported information in your credit report that can result in a drop in your credit score:
- Late payments
- High Credit Utilization
- Other negative factors like collection accounts
Keep Track of Your Credit Health
It is best to check in on your credit score and credit report as much as possible. This is to constantly keep track of your current credit health and see signs of trouble early. Moreover, since checking your credit score and credit report by yourself doesn’t have any negative impact, you can choose to check them out any time at your convenience.