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Have You Checked Your Credit Recently?

BLOG, PERSONAL FINANCE  |  4 Mar 2016

By Jon Aldrich

Identity Thief

Almost daily we hear reports of hackers stealing personal information either from large data breaches at places like Target or Home Depot or via e-mail scams and even with old fashioned phone calls to unsuspecting victims with someone claiming to be from the IRS demanding money or credit card information. More recently, there have been countless cases of identity thieves filing false income tax refund claims that get discovered when the victim files their tax return. I did write about this several years ago, but this is a good refresher and some additional information on what is an important topic these days.

Getting your identity stolen can be a major headache both financially and emotionally. It often takes months or years to get things cleaned up and your credit repaired. Although, it may be just about impossible to stop identity theft entirely, there are a number of things you can do to minimize the chances of it occurring or stopping it before it gets out of hand.

One of the most inexpensive and easiest options is to check your credit reports once a year from the three major credit reporting agencies, Experian, TransUnion, and Equifax. These companies are required by law to give you one free credit report a year. However, each of these sites likes to try to sell you a bunch of other features that you may not need on their websites. Thus, the easiest way to ensure you get a free report is to go to www.annualcreditreport.com. This site was mandated by federal law and is an easy way to obtain all 3 credit reporting agencies reports on one site for free. There are other similar looking sites such as freecreditreport.com which will give you a free report, but is operated by just one of the credit reporting agencies and will attempt to sell you other things such as your FICO score, which you don’t really need to pay for as I will explain later.

Rotating Schedule

Since there are 3 reporting agencies (and it is a good idea to check all 3 regularly), I like to use a rotating schedule to make sure I look at each once a year. This could be accomplished by ordering the Experian report each January, the TransUnion report each May, and the Equifax report each September. This would give me a regular rotation of each agencies credit report, and puts me on a schedule so that I receive a report from each agency annually. Of course you can create your own schedule; the important thing is that you do review it periodically.  If you are married, be sure to check your spouse’s credit as well. If you have young children it is a good idea to check their credit reports too. Identity thieves often target children, as they know that it could run undetected for years, since most people do not give much thought to their children’s credit histories.

So What Am I looking for?

Your credit report will likely be several pages long and be sorted by each company you have a current credit or loan account with or had one with in the last several years. You can view it on screen, print it out or save to a file on your computer. You are looking to make sure that you recognize all the companies and balances on your report and that they are accurate. You will also see who has been pulling your credit history recently. If you see something that you do not recognize or is in error, you will want to contact the credit reporting agency and get it corrected or make sure someone hasn’t hijacked your credit information. They will be able to help you initiate the steps you need to take to either correct an error or stop the process of the identity theft. On my report there are some accounts that have not been used for 7 or 8 years but do not have any balances. They still show up, because the accounts have not been closed.  There are pros and cons to closing accounts that are no longer being used (see below from www.creditkarma.com ).

Closing Accounts Pros

Closing Accounts Cons

SOURCE: www.creditkarma.com

Identity Protection Services

If you really do not want to mess around with checking your credit reports every few months and would also like some additional piece of mind, you can enlist the services of a credit monitoring company such as LifeLock, IDShield or Zander. These companies will monitor your credit and alert you to suspicious activity in your credit reports for a monthly fee of around $10 or so. They will alert you so that you can stop nefarious activity promptly before it gets out of hand. The services provided don’t really prevent identity theft but do help you keep better tabs on things. Often, though, their real benefit is the services that they offer if you are a victim of identity theft, so that you don’t have to tackle the problem alone. For example, if your identity is stolen while under LifeLock’s protection, an Identity Restoration Specialist takes charge to help you restore your identity. They also provide reimbursement for certain out-of-pocket expenses such as the cost of replacing documents, lost income, etc.

Quick Tip

While I was writing this article I came across a way for you to opt out of all those unsolicited credit card offers you get in the mail, which can be great tinder for an identity thief. The site is called www.optoutprescreen.com and is run by the major credit reporting companies mentioned above. All you need to do is go to the site and you can choose whether you want to Opt-out of receiving offers for credit by mail for 5 years or permanently. If you change your mind and want to opt back in, you can go back to the site and do that. It is very simple to do and just took me a couple of minutes. I can’t wait for my junk mail to be reduced since I tend to get a lot of credit card and loan offers. I may save a tree or two as well in the process.

A Note on FICO scores

If you want to see your FICO score, it is much easier to obtain this score for free then it was just a few years ago. More credit card companies such as Discover, Citi, Chase and Capital One include it for free with their credit card statements. There are a number of sites that purport to give you a free credit score, however, it is not a true FICO score, but rather an estimate of your score (referred to as a FACO score) based on the factors the site believes the credit reporting agencies use to calculate the FICO score. For the most part, these scores are relatively similar, but the FICO score is the actual one most lenders will use in their credit decisions.

FICO Score Break Down

FICO Score Calculation

Source:myfico.com

Either way, using a credit monitoring service or checking on your own is much better than not keeping up on your credit reports at all. In this day and age, with everything online or paid for with credit cards, there is always a chance that bad people will try to leech off of your credit. And although it is impossible for anyone to stop identity theft 100%, you can at least take the initiative to be proactive in your defense.