Why Monitoring Your Credit Matters

Next to your identity, your credit is your most valuable asset. Your credit helps businesses and financial institutions get to know you in a way that a simple "Hello" and a handshake could never allow for. Through your credit reports, businesses can determine the level of risk that you may pose to them as well as your ability to pay for their products and services.

Having good credit can save you hundreds - even thousands - of dollars in interest fees and payments, security deposits, and premiums. Learning how to properly monitor your credit is a healthy, financially responsible habit that will help you identify potential problems by spotting the warning flags that could signify identity theft, corporate fraud, or credit fraud.

Your credit can help you achieve your financial dreams - or it can stand as a impenetrable force to keep you away from those dreams. As such, it's a good idea to learn how to invest your time into protecting your credit score. Learning how your credit is used and by who will help you learn what you need to do in order to protect it.

Who Uses Your Credit Scores?

Businesses in a wide range of industries use your credit scores to make dozens of decisions about you every day. It's common knowledge that car dealerships, credit card companies, and real estate companies will use your credit reports and credit scores to determine whether or not you are eligible to borrow their money and make a major purchase. But did you know that these same credit reports and scores could also be used to determine how much money you'll be spending in insurance premiums to protect these purchases? Or that your credit score could determine whether or not you'll need to pay a security deposit on your new electric or gas account before they will furnish your new home with power? Most importantly, your credit score can even be used to determine whether or not a company will want to hire you to work for them.

Chances are, you won't meet every person at every company that could make a credit-related decision about you. Whether you're applying for a job, applying for a line of credit, or applying for a lower interest rate on an existing line of credit, your credit report and score will have to serve as your first impression for most of the businesses involved in making these decisions. Investing the time it takes to monitor and protect your credit report is the best, most important step to making sure your first impression is a good one.

What Can Happen to your Credit Score?

Along with being your most valuable asset - your credit is also a very delicate resource. Similar to trust - it can take a lifetime to earn but can be destroyed with just one mistake. Unfortunately, that mistake doesn't necessarily have to have been yours. Inaccuracies, human errors, and fraud can just as easily destroy your credit scores and with them destroy your good name.

Accidents happen, there's no way to completely avoid those. Sometimes, a credit bureau can receive credit information about someone with a similar social security number as yours - or someone with a similar name - and add that data to your credit report by mistake.

Sometimes, inaccuracies on your credit reports are done on purpose through identity theft. Identity theft is a crime in which a person uses your personal information such as your name and even your social security number to gain something such as a bank account or credit card. Identity theft can happen on any of several levels - from using a stolen credit card to using your social security number and committing tax fraud.

Contrary to popular belief, most identity theft still happens offline - through stolen mail, wallets, or personal documents. And if it isn't caught early, identity theft can be very difficult to remove from your credit reports and can cause confusion and problems even years after the theft has occurred.

Why Should You Monitor Your Credit Reports?

Properly monitoring your credit reports will help you keep an eye on all of your credit resources. Not only will you be able to track positive changes, but you'll also be able to catch negative changes and mistakes that will need to be removed before they can truly damage your credit score. Regular monitoring will also help you to prepare your credit for use when you need it - such as helping to clean it up before applying to make a major purchase.

By monitoring your credit carefully, you will always be the first to know when something happens that changes your scores - whether those changes are positive or negative. And by monitoring all three of your credit reports, you'll be better prepared to face whatever credit challenges may lay ahead.