Did you know that you can check your annual credit report for free once each year? You may not think that checking it every year is necessary. After all, you have a general idea of how your credit is. You’ve been approved for credit cards and auto loans. You make your payments on time and keep an eye on your balances. However, credit scores are complicated. To best understand your score, you need to understand all of the following:

What’s on my credit report?

First, you should know that you have three credit reports, one each from Equifax, Transunion, and Experian. These different companies create credit reports based on their own criteria. Your credit score will vary based on each report, as each bureau has its own way of measuring your score. On each credit report you can see:

• An overall history of all past credit accounts
• The specific payment history of each current credit account -- including the payment amount and the length of time it was past due, if applicable
• Debt history – including past reported balances on all open accounts

                                                                    ^{Are you interested in receiving a free annual credit report? Click here to learn more.}

Check for correct information.

As you look at the information listed above, make sure everything looks correct. If late payments or overdue accounts are reported, you’ll want to make sure the information reported is accurate since it impacts your score negatively.

You’ll also see personal information like your address, phone number, and employer history. It is important to keep this information correct, primarily since it can be used to verify your identity in relation to credit pulls.

Verify that your history is correct.

When you close a credit card or pay off a loan, it doesn’t disappear from your report. The information about the length of the account and your payment history will still be available to creditors who look at your report. A favorable credit history is a great indicator that you’ve been able to manage money successfully.

However, if you see discrepancies on balances, how much you paid, and whether the account was in good standing, you should dispute those. Look back at bank statements and be prepared to argue your case to get the information corrected.

You may not be looking to make a big purchase now, but by checking your credit report regularly, you can be prepared in the future. Do an inventory of your credit history once per year while the information is fresh on your mind. Don’t wait until five or ten years down the road when details from the past may be a little hazy.