I got a message the other day from Discover, telling me that my wife needed to call their fraud department immediately about her account. It was unusual, since neither of us have accounts with Discover. When she called them back, they told her that someone had opened a credit card account using her information. Luckily, they hadn’t charged anything to the account yet. She told them that the account was fraudulent and had them cancel the account. They advised her to put a fraud alert on her credit reports and be careful with her personal information. My wife contacted TransUnion, one of the three major credit reporting companies, and initiated a fraud alert on her credit report. TransUnion told her they would contact the other two agencies, Experian and Equifax, to have them do the same.

A couple days later, the Discover card came in the mail. We got rid of it and though that was the end of it. The next day, however, another card arrived. This time, it was from Citi. She called them and told them the account was fraudulent. We got rid of that card, too. Since then, no other strange cards have arrived in our mailbox. Not so for a friend of ours. He called to tell me that his wife had just received a card she didn’t apply for. They took the same steps we did, and now she has a fraud alert on her credit report, too.

Because the fraud alert is now on my wife’s account, if anyone tries to open credit in her name, the business issuing the credit is required to contact her. They will verify whether the credit request is legitimate before issuing the credit. The fraud alert is free, lasts for 90 days, and can be renewed. Since she was a fraud victim, my wife is entitled to see her credit report for free (in addition to the free reports below). We’re going to wait 30 days to check it, since most new information won’t appear before then. We want to make sure that the fraudulent accounts either don’t show up or are flagged as fraud.

How to Check Your Credit Report

What was ironic about the situation was that I had just checked our credit reports in August, and everything looked fine. I check them for free three times a year, using www.annualcreditreport.com. Federal law says that each citizen is entitled to a free credit report once a year from each of the three reporting agencies. Some people request all three at once. I’ve started spreading ours out, checking one every 4 months. This way, I can see our credit history on a more regular basis.

I look at our reports to see that our payment history is correct, and that there aren’t any accounts I don’t recognize. One year, I found that my dad’s car loan account was on my report. We have the same name, so I can see how it happened, but it shouldn’t have been there. Checking our reports also allows me to see who has made inquiries into our credit. For example, I just shopped around for insurance, so I expect to see those companies’ inquiries the next time I check.

When you check your credit, make sure you go to the right site. There are plenty of other sites out there that say “Free Credit Report,” but www.annualcreditreport.com is the only one that is authorized by the government and the three reporting agencies. Other sites try to sign you up for some service that will bill you monthly after a trial period. So while your initial credit report is “free,” you might get stuck with a paid subscription you don’t need.

How’s Your Credit History?

It’s important to know your credit history. Your credit history is scrutinized every time you apply for a loan, buy insurance, or apply for a credit card. If you apply for a new job, your employer may check your credit. Being denied credit or not offered a job is not the time to find out what your credit looks like. If you are denied a credit card, the issuer must tell you why. If your credit score affected the decision, they must explain what factors they used to come up with that decision. Use that to your advantage to improve your credit.

You should not have to be surprised by what’s in your credit report. You should already know it, and if it’s not accurate, have taken steps to remedy it. Do you have a bankruptcy that’s older than 10 years? In most cases, it shouldn’t appear on your credit report anymore. If you defaulted on a loan or were late on credit card payments, that information is not usually reported after 7 years. Make sure that the information that others are using to evaluate your credit is accurate. Also make sure you are not inadvertently damaging your credit. Opening and closing accounts has an effect on your score, as does not paying bills on time. There are several methods for building your credit, but the best is to know what credit you have available, use it wisely, and pay on time.

There are a lot of companies that claim that they can “fix” your credit. They can’t remove negative information, like late payments or a bankruptcy. They can only have incorrect information removed. Therefore, if you need to dispute something on your credit report, you can do it yourself. The Federal Trade Commission’s website has a lot of great resources related to money and your credit to help you.

What About Your Credit Score?

Your credit score is a numerical representation of your creditworthiness, measured on a scale of 300-850. The higher your number, the better your score. It is based on of the information that is found in your credit report. Lenders and insurers use the credit score to help determine your risk level and eligibility and for their products or services. Your credit score can also affect the interest rate of your loan or credit card.

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The most widely used credit score is the FICO score, but there are others, including those designed by each of the three reporting agencies. Your credit score factors in the number and types of accounts you have, how long you’ve had them, your repayment history, how much credit is available to you, and how much of that credit you use. Fraudulent activity that you don’t know about or don’t resolve can have a huge effect on your credit score.

Its not really necessary for most people to know their credit score. You may be asked if you know what it is when you are shopping for loan quotes, but the lender is going to research it anyway. Since your score reflects the information found in your credit report, you should start there. If you have a long credit history, don’t use a lot of your available credit, and pay your accounts on time, your credit score should be pretty good, and you may not need to see a number. However, if you’re trying to build or repair your credit, it may be useful to see your number so you have an idea of your progress.

Free Credit Score?

You are entitled to receive your credit report for free each year, but you may have to pay for your credit score. Check your credit card statement first – they may give it to you for free. If you apply for a loan, your lender may also give you your score if you ask. If neither of those work, you can buy your credit score directly from FICO for $20, or pay one of the three reporting agencies for it when you get your free credit report. You can also get your credit score from an online service, but you’ll probably have to sign up for a credit monitoring service. They’ll give you your credit score for free, but be sure to cancel your subscription within the first month. Otherwise, you’ll be paying for a monthly fee for a service you can provide yourself.

Take Action

Checking your credit report regularly can help you avoid long-term damage from fraud or inaccurate information. Knowing your credit history and how to build your credit will pay off when it comes time to apply for a new loan, credit card, or line of credit. Your credit score is an important factor when it comes to the interest rate you get on a mortgage or credit card. It can literally save you (or cost you) thousands of dollars. If you get your score and it is below 700, start looking at ways to make it better. If you score is above 700, you are on the right track, but you can always improve it.