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Monitor 4 Things in your Credit Report and Safeguard yourself

by Viv B 2 months ago in advice

The credit report provides more than just the credit score; it is a tool that can safeguard your financial legacy.

Monitor 4 Things in your Credit Report and Safeguard yourself
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Have you ever overjoyed or get dismayed when your new shiny mobile contract got approved or rejected? Or keep your fingers crossed to get approval for your first credit card? Or prayed God to get your mortgage for your first home to be approved? Is it because of your financial situation, or are you a victim of identity theft?

It does not have to be this way as your Credit Report contains most of the clues, and a few simple steps can take control back into your hand, making the process more predictable.

Plus, you can do it for free.

What is a credit report, and why should you care

A credit report is a history of an individual's personal information and financial dealings. Information in a credit report includes name, addresses, date of birth, present & past loans, bank accounts, other financial contracts etc. The credit reports are curated and generated by a handful of companies known as credit agencies licensed by the government. The leading agencies are Equifax, Experian, and TransUnion. Also, every country may have its own local agencies, such as CRISIL in India.

As you can see, a credit report is just basic, relevant information about your personal and financial life.

So what is the big deal about it?

Well, there are these things called identity theft and online fraud.

Research conducted by Experian showed millions (14+ Million credit cards, 158 SSNs in the USA in 2017) of cases every year where people’s accounts are compromised. The same report shows that people are losing billions of dollars due to identity theft.

There are many ways hackers and criminals exploit their victim, such as taking large credit, using your id for phantom accounts to launder money etc. The credit report provides clues if you are a victim of any such malicious activities. So a glance at the credit report could help you identify such things and take corrective action where necessary.

So here are the key things which a credit report contains and why you should care about them:

1. Your all-important credit score

This is simply a number the credit agencies calculate (in the USA, also referred to as FICO Score) and assigned to an individual. Normally higher the score is better, and each agency has its own scoring rules. You can build your score or repair your credit score slowly by following some financial best practices and avoiding some obvious traps, but it is a different topic. Your credit score plays an important role:

It is your creditworthiness, so it will influence if you will be eligible for a credit. This could be a life-changing thing like the mortgage for your first house or small things like getting your next new shiny mobile. Banks usually don’t disclose their lending rules; however, it is unlikely that a low credit score will get mortgage approval.

The rate of interest paid is normally dependent on your score. That means people with a good score will get better deals. Some products are designed for lower credit scores, but the interest rate on these kinds of products is prohibitory high.

The watch-outs:

Usually, the credit file shows the history of your credit score. Your credit report shows your current score plus your previous months scores to show how the score is changing. Any unexplained change means unusual activities, and you should be concerned. You can also get any change notifications from the agency.

2. Your financial accounts and borrowings

This section of your credit is all about your current and past accounts covering many years. Wide varieties of accounts are included, for example:

  • Bank accounts: current accounts, savings accounts etc.
  • Loan or credit accounts: Credit Cards, Personal Loan, Car Loan, Store Cards, Consumer loans etc.
  • Utilities: Mobile phone contracts, TV & Broadband etc.
  • Mortgages: Home mortgages, investment property mortgage etc.

The watch-outs:

Unknown accounts or credit contracts is a good indication that there are malicious activities that exploited your identity. Criminal and hackers can steal people identity and take credit card, loan etc., using stolen identities.

3. Your Personal Information

This is your digital profile, and it provides some vital information about you. The usual name, additional name, address for the past few years etc., are part of the profile. Additionally, it also provides your financial connections like your wife or business partner with joint dealings. One important additional section here is about public information such as court judgements and bankruptcy information.

The watch-outs:

  • Unknown addresses and people in your financial connections means that someone assumed your identity and got some financial products like credit card or bank account in a different address.
  • Unknown court judgements is a serious case of fraud as the stolen identity might have gone too far, and there is a court judgement. Unless it is rectified, it will hamper your life and career. Your job applications, business deals, credit applications will likely get rejected as the background check or credit search will likely flag this.
  • Unknown bankruptcy information usually means that someone took large credit and declared bankruptcy. This will seriously hinder your life changes as the court judgement one.

4. The searches

These are the traces of companies trying to find out information about you (so search). This happens when you apply for a credit card, loan, mortgages, current account, mobile contract etc. Searches also carried out by insurance companies before selling any products. Any background or identity validation type of checks also leave traces in your credit files. There are two types of searches:

  • Soft searches are like eligibility checks for pre-approved products like credit cards, identity checks etc.
  • Hard searches are like the credit application type search used for a final decision.

Too many searches in a short duration could mean that someone is desperate for credit, and companies usually take it as a negative indicator, which also impacts your credit score.

The watch-outs:

Do you see unsolicited searches in your report? This could mean that someone else is trying to apply for something in your name. This could be the first sign that your identity has been compromised.

What can I do if I see irregularities?

You could do a lot really and repair your credit report, but sooner you do it is better, and it is time-consuming:

  • Disable any compromised cards or accounts till you know that you can securely operate them again.
  • Inform the institutions (bank, credit card company, telecom etc.) where you see the problematic transaction or activities. Usually, they have insurance to protect their customer against such issues.
  • Raise a request or dispute with the rating agency to remove incorrect financial associations. They should have a standard process to correct such things. However, it may be lengthy.
  • Inform your local police about identity theft as they usually have a special branch for digital and cybersecurity.
  • Take insurance with identity theft and online fraud cover.

In conclusion

If you see any unknown activities in your credit report, it is a big red flag, and you should immediately inform the agency, bank and authorities, and follow the procedure to rectify your credit report. Luckily the agencies, banks, police and other financial institutions are ready to help guide you in the right direction.

Regular monitoring of your credit report means that you can take corrective action as soon as possible. As the old cliche goes, knowing that there is a problem is half the solution.

Additional Information

Where can you get your free credit reports depends on which country you from. Here are some reference sites:

USA

  • https://annualcreditreport.com
  • https://www.experian.com

UK

  • https://www.creditkarma.co.uk
  • https://clearscore.com

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Viv B
Viv B
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Viv B

Technologist with expertise in cloud, data and artificial intelligence, and with a special interest in personal finance.

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