1. I pay my bills on time, so I don’t need to check my credit report.

Many people have a general understanding of how to behave responsibly with money. Earn more than you spend, pay your bills on time and be careful about taking on debt. But too often people think this excuses them from checking their credit report. They then check their credit report right before making a major purchase, such as a car or a house. What they find sometimes is shocking: They don’t have much credit or find a new credit card account they had not applied for (a potential ID theft issue). . Checking your credit regularly may help you avoid these surprises.

Tip: Did you know that you can access one credit report a year for free from each of the three credit reporting agencies? Go to annualcreditreport.com to pull your free report. You can also order your credit score for a nominal fee.

2. If I pay off a debt, any associated missed payments can be removed as well.

While it is generally a good idea to pay down debt, doing so doesn’t automatically erase any missed payments or delinquencies from your credit file. Missed and late payments are generally removed 7 years from the date of last activity or the date the missed payment was reported by the creditor.

3. I need to carry a balance on my credit cards or shut them down.

While you do want positive account activity, such as paying a credit card bill on time, there’s no need to carry a balance. Simply paying off a small purchase every month (or every few months) will typically trigger the credit company to report that behavior.

4. Credit bureaus are responsible for approving or denying credit.

Credit reporting bureaus do not approve or deny you credit and don’t make any credit recommendations to lenders. The lenders decide, based on their own criteria, to issue or deny credit to you based on your credit report and score, as well as plenty of other factors based on information that you provide to the lender.

5. I don’t have—and have never had—any debt or credit cards, so my credit is fine.

If you do not have any revolving credit cards (department store credit), installment loans (car loans, student loans) or a mortgage, then you probably do not have a credit file. Without a credit history, it is harder for creditors to determine your creditworthiness. You should consider whether it may help to establish credit if you intend to borrow money in the future. Continuing good habits like paying off your debt in a timely manner will help build your positive credit history.

1. Pay your bills on time. Because payment history makes up about 35 percent of your credit history, paying your bills on time is very important. One delinquent payment that is just 30 days late will stay on your credit report for up to seven years. Remember that paying your bill in full and on time is positive for your credit history and score.

2. Check your credit report regularly. Sometimes people who know they have had some problems in the past—maxed out a credit card, missed a payment or two, or failed to pay a bill that ultimately went to collections—are afraid to check their credit report until it becomes absolutely necessary. However, it’s important to check your credit report regularly, regardless of whether you think you have a score of 550 or 750, so you can see where you stand—what debts need to be paid down, if you have any collections that need to be paid off immediately, or if there is any inaccurate information on the report. You also want to make sure you haven’t been the victim of identity theft, which can destroy your credit.

3. Pay off debt. The debt-to-available-credit ratio is another important aspect of your credit history; it’s more positive to have a higher ratio of available credit to debt. For example, if you have a credit card with a $10,000 limit, and you’ve charged $8,000, potential creditors might be worried about how much additional debt you can take on and about your ability to pay that debt off on time. If you only have a few hundred dollars of debt, you’ll be seen as more likely to be someone who pays debts off quickly and handles credit responsibly.

4. Fix any errors. If you discover an error, whether an erroneous address or a bill marked unpaid that you’re sure you did pay, fix it immediately. A creditor may have missed reporting a payment or you may never have received an important bill that was eventually sent to a collections agency. Start by disputing the error with the credit reporting agency—it will work to resolve the error with you and the creditor. You can also contact the creditor to see if you can resolve the error with that company. Remember to get names and take detailed notes during these conversations so you can reference them later.

5. Consider new credit opportunities. Some people have lower credit scores because they have a very thin file, meaning they don’t have much credit or have a very short credit history. Building your credit history takes time, but you can build a more positive credit report if you open more lines of credit. While it is certainly not recommended to take on debt you don’t need, you may want to try opening a retail, gas, or low-interest credit card. Keep in mind that this credit card isn’t for buying things you can’t afford; it’s about building a positive credit history. Charge only small amounts that you can easily pay off at the end of the month.

By checking your credit report frequently and thoroughly, you can typically spot warning signs for identity theft, halting the crime and mitigating the damage it can cause.

Look for these five red flags as you comb through your credit report:

1. There is a line of credit that you did not open and/or with which you are not familiar. It is a pretty blatant red flag if you pull your credit report and suddenly notice a new credit card you’ve never seen before. If this has happened, it indicates that your identity was likely stolen and used to open new credit cards.

2. An account is delinquent or in collections and you did not know it existed or had been overdue. Often an account you did not know existed will also show up in collections because a scammer isn’t likely to do you the favor of paying the bills he or she accrues. But it’s also possible to see an account you do own wind up in collections. A credit card or line of credit you rarely use could have been stolen and used while the thief had all the bills forwarded to a new address. Utility or phone accounts fraudulently opened in your name could also end up in collections.

3. Your personal information is not correct and/or includes erroneous names or addresses where you never lived. While it might be easy to chalk this up to a clerical error, don’t make that mistake. It could instead mean that your identity has been hacked by someone who has added a new address, name, or other personal information to your file by opening new lines of credit in your name—even if the new accounts haven’t shown up yet.

4. There are hard inquiries for which you did not apply. Hard inquiries are requested on your behalf from potential creditors that are looking into your credit history in order to give you a loan or line of credit. These are inquiries you initiated when shopping for a car loan or mortgage or when applying for a new credit card—you should recognize each one. If you don’t, that’s a red flag which may signal that someone is using your identity to borrow money against your name.

5. There is a Social Security number similar to yours (but not yours!) on your credit report. This may seem to be a simple error, like a misspelled name, but it could actually indicate a new, and very hard to track, type of identity theft called synthetic identity theft. With this kind of identity theft, a thief cobbles together a completely new identity using a Social Security number from one person and a fake name or another stolen name. The “shadow identity” name itself likely won’t appear on your credit report, but people who have been victims of synthetic identity theft have reported instead seeing an erroneous Social Security number appear on their report.

If you spot any of these red flags, it’s time to take immediate action. Start by contacting the police to file a report, and also consider calling the FTC’s identity theft hotline at 877-438-4338 to file a complaint.

Next contact Equifax and the other credit reporting agencies in order to dispute any errors. (Click here to file a dispute with Equifax.) Consider placing a fraud alert or security freeze on your account to halt any further fraudulent activity. Finally, contact the companies associated with any breached accounts in order to have the accounts closed.

While this is a smart financial move, a lot of people worry about what this will do to their credit score—especially if they are gearing up to make a big purchase. Certain kinds of credit inquiries do impact your score, but there is a built-in allowance for interest rate shopping.

Most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time—usually 30 days. In these cases, multiple inquiries will be treated as a single inquiry, and this will have little or no impact on your credit score.

However, shopping around for interest rates usually means you’re preparing for a big purchase. To best protect your credit, there are a few things to keep in mind:

• Apply for the same type of loan for the same amount. It’s fairly evident on a credit report that when five lenders pull your credit for a $300,000 mortgage loan, you’re not buying five $300,000 homes.
• Conduct your business as quickly as possible. While the 30-day grace period is no myth, you might want to treat it as a weeklong grace period. Figure out which lenders you want to check out and do all your applications within a few days.
• Do not apply for other forms of credit during this time period. Applying for too many loans or lines of credit at once could make you look like a higher risk to creditors.

Different types of inquiries

Remember, not all inquiries are created equal; only a hard inquiry will impact your credit score. A hard inquiry is when a mortgage lender, landlord, bank, or other creditor accesses your credit report because of a transaction you initiated. The key here is that you initiated this inquiry by asking for a line of credit from a lender.

The other two types of inquiries generally do not have any effect on your score. A soft inquiry is initiated by someone other than you, such as a lender or creditor. Think of the promotional offers you get in the mail. You didn’t ask for that pre-approved credit offer, but someone at the company pulled your information.

A personal credit inquiry also does not impact your score—you can pull your credit any time you want. And if you are about to apply for a loan or do some interest rate shopping, you should pull your credit report and score so you have a better idea of what kind of interest rates you’ll be offered.

Credit scores typically range from 300 to 850, and each of the three traditional credit reporting bureaus (Equifax, TransUnion, and Experian) calculates your credit score based on the information it has in your credit report.

The credit reporting agencies don’t seek out information from creditors or lenders, and they can only build your credit report based on the information reported to them. Your credit score is determined by a number of factors in your credit report, including:

• The number of accounts you have.
• The types of accounts.
• Your available credit.
• The length of your credit history.
• Your payment history.

It’s important to check your credit report regularly because if any of the information is inaccurate, if any of your accounts are missing, or if there is information that doesn’t belong to you, it can hurt your credit score. If you find inaccurate information, you should immediately file a dispute with the credit reporting agency.

You’re entitled to one free credit report from each credit reporting agency, once a year, from annualcreditreport.com. You can also get your credit score at that time for a small fee. If you want to have more regular access to your credit report and score, you might want to consider a credit monitoring service from one of the credit reporting agencies.

Accurate information is important for your credit score, but any bankruptcies, collections, foreclosures, late payments, or other financial problems can negatively affect it. However, negative information only stays on your credit report a set period of time—usually seven years—so positive behavior like on-time payments and responsible credit usage can improve your score over time.

Read More:
How do late payments affect my credit score?
How long does information stay on my credit report?
How to get your credit report and how to read it

If you fall into any of the above categories, you’ll need to prove your creditworthiness and improve your credit score by taking several important steps, including building your credit history and establishing good behaviors.

Components of your credit report

The same categories of information are in everyone’s credit report:

• Identifying information. This includes your name, address, Social Security number, date of birth, and employment information. This information is not used in scoring, and updates to it are typically received when you apply for credit or benefits.
• Trade lines. These are your credit accounts. Creditors report information on accounts you have established with them, such as the type of account (bankcard, auto loan, mortgage, and so on), the date you opened the account, your credit limit or loan amount, the account balance, and your payment history.
• Inquiry information. This part of your credit report shows the companies that have requested and/or viewed your information. Typically this covers the last two years.
• Public record and/or collection information. Here, you will find details about judgments, tax liens, or bankruptcies. Your credit file may also contain collection account information for debts that have been turned over to an outside collection agency.

How to establish good credit behaviors

Lenders will look to your credit file to determine the answers to the following questions:

• What kind of accounts do you have open?
• Do you make payments on time?
• Do you have available credit?
• What kind of a borrower are you?

If you have a thin credit file, lenders won’t find the answers they need—and they’ll look at you as a higher risk. However, as you open accounts, move or relocate, take out loans, open utility accounts, pay off debt, and move around in the financial world, your credit file will get thicker. Your credit history will soon start to reflect who you are in the financial world.

Once you establish good behaviors, such as paying on time and staying well below your available credit limit, your credit score will likely improve. The formula is different for every borrower, but good behaviors like these will be reflected in your credit score over time. Lenders can then look at your score and get a better idea of what kind of borrower you will be.

If you’re starting out in your financial life or if you need to straighten out your finances, see some of our other resources to help improve your creditworthiness and get on track with good financial habits.

Fraud alerts and security freezes can help you if you think you might already be a victim of identity theft, but taking control in advance by locking your Equifax credit report can help prevent unauthorized activity from occurring. The big difference between fraud alerts or security freezes and locking your credit report is your control over the activity.

If you have in place select Equifax credit monitoring products, you have the ability to lock and unlock your credit file at a moment’s notice. You don’t have to file a report or contact an agency—you can log into your Equifax monitoring product or use the Equifax Mobile App to almost instantaneously lock or unlock your credit report.

When would you want to lock your Equifax credit report?

There are situations you may be in that can require a great deal of legitimate activity on your credit report. For example, you may be shopping for a new car, opening a new credit card, setting up utility accounts, or looking to refinance your mortgage. During these times, lenders and other organizations will need to access your credit report.

All inquires are not bad. It’s acceptable for these people and services to look at your credit report in order to evaluate you for the best deals and interest rates. But you may want to consider a monitoring product to keep tabs on who is looking at your credit report and to make sure only authorized accounts are accessing your credit file.

When you lock your Equifax credit file, access is restricted from new inquiries. This means that you can’t shut out lenders with whom you already have a relationship. The lock also won’t restrict your everyday financial activities—but it will prevent access to your credit report by certain third parties, such as credit grantors or other companies and agencies.

Note that there are exceptions and that the following will not be locked out:

• Companies like Equifax that provide you with access to your credit report or credit score or that monitor your credit file.
• Federal, state, and local government agencies.
• Companies reviewing your application for employment.
• Companies that have a current account or relationship with you.
• Collection agencies acting on behalf of those whom you owe.
• Someone accessing your account for fraud detection and prevention purposes.
• Someone accessing your account for an insurance application.
• Companies that wish to make pre-approved offers of credit or insurance to you.

If you don’t plan to apply for new credit any time soon, locking your credit file is a great way to protect your credit report and ensure no one is using your personal information to open credit accounts. When you need to apply for new credit, you can feel secure knowing you can always temporarily unlock your Equifax credit report.

READ MORE: 
Saving Money On Banking Fees
How to Recover from Identity Theft
Resources for Victims of Fraud and Identity Theft
Saving Money and Setting Financial Goals With Your Children
Fraud Alert Versus Security Freeze
Fraud Alert Versus Security Freeze – Part 2

As much as we’d all like to think we’re unique creatures, we often share the same problems. How do I know this? I see the same questions coming from Equifax customers every month.

Since April was Financial Literacy Month, let’s take a look at some of the most common questions and try to raise our financial IQ for the rest of the year. The sooner we know how to tackle these common financial questions, the sooner they stop being problems.

FAQ: What is a security freeze, and how do I place a security freeze on my credit report?

A security freeze essentially prevents your credit report from being reported to third parties, except those permitted by law or those for whom you request we lift the security freeze.

Only you can request a security freeze be placed on your Equifax credit file. The security freeze will remain on your Equifax credit file until you request that it be permanently removed, or you request a temporary lift of the security freeze for a specific credit grantor/credit file user or date range.

The easiest and fastest way to place a security freeze on your Equifax credit file is online at Equifax.com. You may also request a freeze by phone or mail.

A security freeze requested with Equifax will freeze only your Equifax credit file. You’ll need to contact TransUnion and Experian directly to freeze those files.

A security freeze will require you to plan ahead for all your credit applications, as you will need to contact us to request that we temporarily lift your freeze so we can report your Equifax credit file. Depending on your state, it may take up to three business days to process your request to temporarily list the security freeze.

FAQ: What are the security freeze fees in my state?

You may be charged a fee for different actions involving security freezes. These fees can vary by action and whether or not you are a documented identity theft victim. Actions include:

Security freeze placement
Date range lift
Specific party lift
Permanent removal
PIN replacement

Security freeze fees can also differ by state. Visit Equifax.com for a list of the various fees for each state.

Come back for more frequently asked questions, including how to correct errors on your credit report.

3 Steps to Taking Control of Your Credit Report
Credit Trends: When Will Foreclosure Levels Start to Fall?
Consumers Need to Limit Debt Because Creditors Won’t Do It For You

You lock your door when you leave your house; you hold your purse tightly on a busy street. You probably ask the neighbors to pick up your newspapers when you’re out of town.

We all have certain habits to protect our personal possessions and avoid theft, but what about everyday practices to protect against identity theft?

Most of these preventive measures come down to common sense. The goal is to keep your personal information safe and prevent unauthorized people from getting access to it. Identity theft is scary, and having your identity compromised can cost you a lot of money and time. Follow these best practices and get in the habit of protecting your personal information to avoid identity theft:

• Don’t carry more credit cards than you need.
• Shred all mail and account statements that contain personal information.
• Record all personal and account information electronically and keep a hard copy in a safe, secure place.
• Create strong passwords (don’t use your pet’s name or your birthdate or other easily guessed words) and change your passwords regularly.
• Don’t share your passwords.
• Record your passwords in a secure location, or in an encrypted file on your computer. Don’t write them down and keep them under your keyboard or in a desk drawer.

Whether you’re performing simple account maintenance or dealing with the mess of identity theft, you’ll find it helpful to have the following details easily accessible:

• Account numbers
• Name/personal information on accounts
• Authorized users
• Issuing company and/or bank
• Phone numbers to report lost or stolen cards

Once you’ve recorded all this information, make sure you keep it stored in a safe, secure place.

Unfortunately, no matter how much you do to protect yourself against identity theft, your identity may be compromised in a way that’s out of your control. In addition to getting in the habit of protecting your identity, you can also sign up for an identity-monitoring product, like Equifax’s ID Patrol, that will alert you in the case of identity theft or fraud. The sooner you know that your identity may have been compromised, the easier it will be to clean up the mess.

ID Patrol and other identity-monitoring products from credit-reporting agencies monitor activity on your credit report and credit cards. You can receive alerts when new accounts are opened, when balances change, and for other kinds of credit activity.

The thinking behind this kind of monitoring is that you know what kind of accounts you have and when you make big purchases, so if anything shows up that doesn’t look familiar, it could be a sign of identity theft.

The key to protecting yourself against identity theft is getting in the habit of protecting your personal information and getting real-time information about activities related to your credit and your identity.

Over the course of my career—first as a bank manager and now in my job at Equifax—I’ve worked with a lot of people coming out of a divorce. They’re trying to start a new life on their own, and the financial details can be a tough knot to untangle.

The big question I always hear from people is, “In the settlement, the divorce decree states this debt belongs to my ex-spouse, so why is it showing up on my credit report?”

Unfortunately, lenders, credit grantors, and credit-reporting agencies don’t care about who got what or what your divorce decree states. If your name is on the account and the debt is held jointly, you are responsible for making sure that debt gets paid.

Here are some of the other most common questions I hear about credit and divorce.

FAQ: Will my spouse’s information or accounts appear on my credit report?

You and your spouse each have your own separate credit file. The consumer reporting agencies maintain credit files on individual U.S. residents only. They do not maintain joint files for spouses. Only accounts that are in both names will show up on both files. Any account for which you are a cosigner or an authorized user will also show up on your file.

FAQ: How do I make sure my credit report accurately reflects my name change and new personal information?

If your personal information (name, address, etc.) is incorrect on your credit file, we recommend that you first contact each of your creditors and confirm that your personal information is correct in their records. Updating your personal information with your creditors will help make sure that information they report to Equifax is correct.

You may need to provide the following documentation to confirm your identity and personal information:

• Court documents for legal name change
• Valid driver’s license
• State or military ID reflecting new name/address
• Copy of Social Security card reflecting name change

FAQ: How do jointly held accounts show up on my credit report?

When you open a new line of credit, you can apply for an individual account or a joint account. Joint accounts will be listed on your credit report as a joint account if the creditor reports it as such.

FAQ: How do I separate my credit accounts from my ex-spouse’s accounts?

You can close all joint accounts (making sure the balance is paid in full and on time) and reopen accounts in your name only. You should be able to avoid future credit tangles with new accounts.

However, closing out joint accounts and reestablishing individual accounts may affect your credit score. A better approach might be to work with your creditor to separate the debt (if possible) and reestablish the account in your name only.

FAQ: How do I inform lenders and credit grantors of my divorce?

If you have individual accounts, your divorce probably won’t affect your credit cards or loans too much. If they’re joint accounts, contact each creditor individually and work with them on how best to report the debt to the credit-reporting agencies.

FAQ: Can my ex-spouse see my credit report?

Your spouse or ex-spouse cannot see your credit report without written permission from you.

FAQ: My ex-spouse is responsible for some late payments on my credit report. How do I explain that?

The bottom line is that if you signed up for an account with someone else, you are responsible for that debt being paid. Even if your spouse agrees to pay the debt in the divorce settlement and that is reflected in the divorce decree, you are still legally liable for the debt. The creditor will hold those who applied for the account, whether it is individual or joint, responsible for paying on time and in full.

However, if you do find yourself with a blemish on your credit report due to your spouse’s payment history, you can submit a consumer statement to be attached to your credit report. You can detail the situation and explain your circumstances. Some creditors may take the statement into account when evaluating you for future credit and risk.

Don’t forget to check out last week’s post on Establishing Credit with Joint Accounts.

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Credit Report FAQs: What Do I Do When a Family Member Dies?
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