Every reason to check your credit report before the end of the year, even if your credit is excellent

Westend61/Getty Images

• Checking over your credit reports each year is the best way to find reporting errors and early signs of identity theft. However, you can also sign up for a service to watch over your reports and check for fraud on your behalf.
• If you do find incorrect information on your credit reports or accounts that aren't yours, you can dispute these errors with each of the credit bureaus and have them removed.
• Considering you can check your credit reports for free each year at AnnualCreditReport.com, there's no reason not to take this important step to protect yourself.
• Let Credit Karma track your credit for you, for free »

Many credit cards let you see your FICO score on your monthly credit card statement, and free services like Credit Karma and Credit Sesame let you see your credit score for free. Having this option can help you track your credit score progress over time, but it can also help you keep an eye out for any credit problems that arise. Plus, it's always nice to have an idea of your credit score in case you want to take out a car loan, apply for a home mortgage, or borrow money with a personal loan.

If you want to take credit monitoring further, however, you can take the extra steps to take a look at your credit reports from all three credit reporting agencies - Experian, Equifax, and TransUnion. Doing so comes with real benefits that can run deeper than simply knowing your score.

Here's why you should check your credit reports every single year - even if your credit score is excellent:

Small mistakes on your credit reports can make a huge negative impact

First, it's important to note that it's fairly common for credit reports to have errors. Mistakes can be something as simple and innocuous as an incorrect date reported for an account opening, but errors can also be devastating. For example, you may find a loan balance is listed on your credit report in a much higher amount, or that a credit card you closed in good standing is still reporting a balance. Both of those mistakes can impact your credit score in a negative way even though they're not your fault.

You may not know about these mistakes unless you take the time to look at your reports, which is probably the most important reason to take this step every single year.

Spot identity theft sooner rather than later

In addition to errors, checking your credit reports could also help you stumble onto proof that someone is using your credit or trying to steal your identity. For example, you may find a credit account in your name that you don't even recognize, or you may find you have addresses you have never lived at listed on your reports.

According to a 2019 study from Javelin Strategy and Research, 14.4 million Americans were victims of identity theft in 2018. While you can pay a credit monitoring service to watch out for signs of identity theft and companies like Credit Karma will monitor your credit for free, checking your credit reports is one way you can find the signs of credit tampering on your own.

You can dispute any errors or incorrect information you find

What happens if you find errors on your reports? You can dispute them online or in writing and have them removed. Taking the steps to dispute errors on your reports can lead to negative information being removed so it no longer impacts your credit score.

If you find you have mistakes on your reports that need corrected, our guide to disputing credit report errors can help.

Your credit score plays an important role in your life

If you don't know why you should care about your credit score, take a few minutes to think over all the ways good or poor credit can impact your life. Poor credit can mean paying higher interest rates for a mortgage or a car loan, and even not being able to get approved for financing at all.

A risky credit profile could even mean missing out on a job you want if a potential employer asks to look at a modified version of your credit report before they hire you. Bad credit means you may not get approved to rent an apartment without a cosigner.

With these important details in mind, it's easy to see how spending a few hours to look over your credit reports would be well worth your time.

Checking your credit report is free

Finally, don't forget that you can check all three of your credit reports for free one time each year with the website AnnualCreditReport.com. You could check all three of your credit reports at once, or you could stagger them throughout the year so you're checking on at least one of your credit reports every three or four months.

Just remember that it's important to check all of your credit reports each year no matter what. The same information isn't always reported to different credit bureaus, so it's possible each of your reports is somewhat incomplete. The only way to protect yourself and your credit is to know what is listed on each of your reports every single year.

Credit Karma can keep an eye on your credit and alert you when something changes - for free »

• More credit card coverage
• What's the best airline credit card?
• The best cash-back credit cards
• Southwest credit card review
• Best rewards credit cards

Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.