59% of Americans are making a big personal finance mistake

Only 41% of Americans check their credit reports more than once per year, according to a new nationally representative survey of 1,000 people by personal-finance website WalletHub. However, the same report also found that 84% of Americans think (correctly) that they should check their credit reports more often. If you're among the nearly six in 10 Americans who checks their credit report just once per year or not at all, here's why you should consider checking it more often.

Checking your credit report regularly can help you detect identity theft

Perhaps the biggest reason to check your credit report often is to be able to quickly detect identity theft. Since many people get their FICO credit score for free from one of their credit card issuers, you might think that's enough, and you'll be able to notice any suspicious activity by an unexpected drop in your score.

That's not necessarily true. Let's say a thief opens a credit card in your name and begins using it to make purchases. The application for credit and the new account itself aren't likely to drop your score all by itself. Instead, the big drop in your credit score comes a couple of months later, when a statement has been issued on the fraudulent account and the payment is already late.

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On the other hand, by looking at your credit report, you could spot this fraudulent activity simply by spotting a credit inquiry that you don't recognize, which generally hits your credit report just a day or two after the thief applies for credit in your name.

For this reason, it's important to regularly scan your credit report for accounts and inquiries you don't recognize, as well as Social Security numbers and names of "co-borrowers" that you don't know. By monitoring your credit report, you can place a freeze or fraud alert on your credit, investigate the suspicious information, and take actions such as filing an identity-theft report before more serious damage can be done.

You may be surprised how many credit reports contain errors

According to a study by the Federal Trade Commission, about 26% of consumers find "potentially material" errors on at least one of their three credit reports. To be fair, not all errors on credit reports have the potential to change your credit score, such as misspellings and incorrect addresses, but many do.

In fact, the study determined that most of the consumers who found errors had their credit reports successfully modified as a result of the dispute process, and 13% of all consumers, half of those who found errors, experienced at least one credit score change.

Since a higher credit score could make it easier to get a loan, and save you money in interest, it's certainly worth checking for errors regularly. If you happen to find errors such as a payment that was incorrectly reported as late, an open credit account mislabeled as closed, or other credit-score-affecting errors, you might be pleasantly surprised at the potential effect of fixing them.

You can get your credit report for free

Another good reason to check your credit report is that it can be done for free. Many people are familiar with the law that allows you to obtain a free copy of your credit report from each bureau once per year at annualcreditreport.com. You're also entitled to a copy if you're turned down for credit because of information in your report.

In addition, several websites offer truly free credit reports, but there are a few caveats. WalletHub, for example, offers truly free credit monitoring and updated credit reports, but it's important to mention that they are solely based on TransUnion data, just one of the three credit bureaus. Even so, new accounts are typically reported to all three bureaus fairly quickly, so a service like this should let you detect identity theft quickly.