If you feel your finances are in order, you may not have given much thought to your credit score. And why would you? If you pay your bills on time and don’t hit your credit limit every month, it may feel like there’s little room for concern.

Many don’t realize there’s a problem with their credit until they attempt to make a significant purchase, like a new car. The first sign of trouble may come as an unexpected rejection of a credit application. While the cause may not be immediately clear, the best place to start looking for answers is your credit report.

There are five sections on a standard credit report, but three of them matter most when it comes to credit fraud:

• Personal Information
• Account Information
• Hard & Soft Inquiries

Personal Information

This section of a credit report lists basic personal information, like this:

Name: Bob McNally, Sr.
Social Security number: xxx-xx-1203
Birth date: 11-23-1956
Address: 125 Credit Fraud Dr, Anywhere, USA
Phone number: (561) 555-1212

The first red flag you may notice is an incorrect address.

This may be a minor oversight, but it could also be an indication of a larger issue. Fortunately, you have the option to file a dispute with the credit bureau. Since this information is compiled from various sources—such as banks and utility providers—errors, including typos, can occur, potentially leading to a fragmented credit history. While these inaccuracies rarely affect your credit score, they can sometimes serve as an early warning sign of identity theft.

Account Information

A credit report contains information useful to impostors and investigators alike, but the Account Information section is where identity theft can start to become obvious. Here is where you can see all the dates your accounts were opened or closed, your payment history, credit use, account balances, and the status of any loan payments.

While your account information may appear to be in order, it is important to remain vigilant for any irregularities, especially if a new account has been opened or is marked as “In Collections.” Given your financial and credit history, such discrepancies could be a cause for concern.

Hard and Soft Inquiries

This is often the most important section of a credit report. Hard and soft inquiries are generated whenever an authorized person or institution requests someone’s credit report.

Soft inquiries are those NOT generated by a prospective lender. This includes when you pull your own credit report, credit checks made by banks, or credit card companies offering you goods or services (besides a line of credit). Most importantly, soft inquiries don’t impact your credit rating.

Hard Inquiries are a different story altogether.

Hard inquiries are made by a potential lender for the purpose of reviewing your history. This is usually because you’ve applied for a new line of credit, auto loan, or mortgage. Hard inquiries can negatively affect your credit scores, but that’s not the only reason to watch this section closely.¹ An unexpected hard inquiry is a sign someone may have applied for a line of credit in your name.

Many people underestimate the importance of reading their own credit report. But sometimes, tracking your credit is about protecting your identity, your investments, and your future. If you’d like to learn more about your credit, speak to a PersonalSAGE Financial Coach.

1. Yahoo.com, April 4, 2024