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For so many of us, checking our credit reports is probably not at the top of the to-do list (unless there’s a pressing need). However, failing to take the time to regularly do so can be a costly mistake.

“I’ve had the experience of routinely getting my credit report, only to find a couple credit cards opened under my name [without my knowledge],” says Phoebe Stein, a librarian based in Yonkers, N.Y. “My credit score was fine, but that all could have had a worse outcome.”

Fortunately, Stein was able to cancel the cards taken out from the scammer before she took a hit on her credit. While she faced an uphill battle when she called the issuers to close them — she said the companies kept trying to get her to stay — had the cards stayed open, that could have led to several problems.

For one, as Credit.com expert Barry Paperno explains, having a “high credit utilization (balance/credit limit) can drop a high FICO score (780+) by as much as 45 points.”

Worse still, if Stein remained oblivious to the problem, late payments on the accounts could have piled up, trashing her score beyond repair. That isn’t uncommon, says Credit.com’s Director of Consumer Education Gerri Detweiler, who notes that thieves tend to open accounts, “pay the bills for a little while and then bail.” Most consumers don’t learn what has happened until it’s too late, and they pay dearly for it because a 30-day late payment can cause a high FICO score (780+) to drop as much as 100 points.

Shana Mosher, a public policy analyst in New York City, faced similar problems when she neglected to check her credit for several months. An Exxon gas card, long-distance phone cards, and “a card intended for purchasing Gateway computers” had all been opened under her name without her knowledge.

“People opened them, never paid and they showed up on my report,” she recalls.

Beyond the risk of late payments and a high credit utilization ratio, however, Mosher’s problem went one step further. She wrongly assumed the bureaus would figure out the cards weren’t hers. Unfortunately, the burden is on the consumer to contact the bureaus and tell them to correct credit report mistakes.

And don’t forget the inquiries. “Every time the scammer applies for credit using another consumer’s personal information, that inquiry is recorded on the victim’s credit report,” Detweiler warns. Individually, inquiries won’t do much, but over time they can certainly add up and affect your score.

What to Do if This Happens to You

The Fair Credit Reporting Act requires credit reporting agencies, banks and credit issuers to correct fraudulent information on your credit report. Contact the credit reporting agencies and credit issuers and let them know about the fraud. You will have to provide documentation. The FTC tells consumers to take the following steps immediately:

1. Place a fraud alert on your credit reports. This tells credit issuers that you’re a victim of credit fraud, and to contact you to verify any applications for credit before granting it.

2. Close the fraudulent accounts. You’ll need to reach out to the fraud department of each issuer to make sure you’ve closed all of the accounts.

3. File a complaint with the FTC.

4. File a report with your local police, or the police in the community where the identity theft took place.

This is why it’s important to check your credit reports regularly — you can receive your free credit reports from all three bureaus once each year. If you’re a victim of identity theft, you should check them more frequently (or consider signing up for credit report monitoring), even if you have a fraud alert, to make sure no new unauthorized accounts have appeared. Your credit score may also (though not always) be an indicator that something’s gone awry. There are services, like Credit.com’s Credit Report Card, that offer you your credit score for free once a month. At the very least, by checking your score regularly, along with your credit report, you can stay alert to any changes that could derail your credit.

Finally, we’ll be the first to admit that reading — and understanding — your credit report can be overwhelming. The Ultimate Credit Report Cheat Sheet can help you decipher all of that data so you can take charge of your credit.

Image: iStockphoto

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