The Importance of Monitoring Your Credit Reports

check your credit report

How many of you claimed your free credit report cards this year? You do realize that employers, lenders, insurance companies, cellular service providers, and utility providers all have the ability to legally review your credit reports as part of their decision making processes, don’t you?  For this reason alone, checking and monitoring your credit reports several times each year is important, but to illustrate this point, let’s throw some numbers on the table, shall we? We’ll start with the numbers three, 200 million, 2003, and four.

The Big Three

There are three generally recognized credit reporting agencies in the United States. They are Experian (Southern California), Equifax (Atlanta) and TransUnion (Chicago).

200 Million

Each of the aforementioned companies houses over 200 million consumer credit files in their databases. And while they do not share information, most of the consumers in their databases are redundant, which is why you have three credit reports. If you think you have control over when your credit reports can be pulled, you’d be mistaken. According to the Fair Credit Reporting Act the credit reporting agencies can furnish your credit report to anyone who has “permissible purpose” including, but not limited to, employers, lenders, collection agencies, YOU, and insurance companies. Point being, your credit reports are readily (and legally) available to any person or company that has a permissible purpose. And no, in most cases your signature is not required.

FACT Act of 2003

In 2003 a law called the Fair and Accurate Credit Transactions Act of 2003 was passed. The law, informally called “FACTA” or the “FACT Act”, amended the FCRA to allow every one of you the right to see a copy of all of your credit reports once every twelve months. FACTA is the law that brought us  It’s too bad not many people know about that right, which brings me to the last of our numbers.

Four Percent

According to the credit reporting industry’s trade association about 25 million free credit reports are claimed every year, which sounds like a huge number. But, when you aggregate the total number of free credit reports that could be claimed every 12 months you’ll see that it’s really not that many at all.

If the three credit bureaus maintain 200 million credit files each, then that’s 600 million that are in play. If you run the numbers, 25 million out of 600 million is just four percent. That’s right, only four percent of consumers claim their free annual credit reports. That means 96 percent of the credit reports that we have the right to see, go unseen. And, they do not “roll over” like cell phone minutes. If you don’t claim them you forgo your right for the prior 12 months.

Why Should You Care?

Having solid credit reports, which means you’ll also have solid credit scores, is no different than picking the right stock or mutual fund. It’s a wealth building tool. Paying less interest on a loan saves you money every month, guaranteed.

And right now is a great time to be on the “buyer’s” side of the credit equation. Auto loan rates are as low as zero percent for some models. Credit card issuers are throwing around zero percent introductory and balance transfer rates as long as you’ve got good credit. And while mortgage rates have gone up over the past several months, you can still get a 30-year fixed rate mortgage at or near four percent, which is not far from the lowest they’ve ever been in the history of mortgage lending.

According to the Federal Trade Commission, between 10 and 21 percent of consumers have confirmed errors on their credit reports. To put that number into perspective, 10 to 21 percent of consumers equals 60 million credit reports on the low end to 126 million on the high end, since we each have three. And what’s worse, most people who have errors on their credit reports don’t even know it.

If only 25 million credit files are claimed every year and at least 60 million are known to have errors, then there are 2.4 times more erroneous credit files than there are credit files that have been claimed by consumers per Federal law, and that’s the best case scenario. The worst case scenario has over five times more erroneous credit files than there are credit files that have been claimed by consumers per Federal law.

Bottom line? Claim your credit reports! Do it more than once every 12 months! They’re simply too important to turn your back on them. And, given that 10 to 21 percent of you who are reading this have errors on your credit reports it’ll be an exercise not only in pulling your credit reports, but also in getting them corrected.

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Published January 13, 2014 Updated: April 29, 2016
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