A toy shark holding U.S. dollar bills © Diane Macdonald, Photographer

You've probably heard that it pays to stay on top of your credit, but how often does a person really need to pull his or her credit report?

 According to Katie Ross, education and development manager for American Consumer Credit Counseling, at the very least, everyone should take advantage of the free credit reports they are entitled to each year via AnnualCreditReport.com. However, generally speaking, she suggests checking your credit report and scores every six months or so to make sure you're in good standing. (Do you know your credit scores? Take MSN Money's quiz to get a free estimate.)

There are times when a credit check (and even subsequent monitoring) is particularly important. We break down a few of them below.

1. You need to know if your identity has been compromised

If your credit card and/or other personal information has been compromised due to a data breach, it's a good idea to pull your credit report. For starters, it can show whether someone has fraudulently used your data.

"Check to see who's been looking at your credit," Bruce McClary, the director of media relations for ClearPoint Credit Counseling Solutions, says, referencing the inquiry section. Hard inquiries stemming from loan applications you did not fill out are often "early clues" your identity has been compromised, he adds.

If you discover you're a victim of identity theft, it's a good idea to monitor your credit while the situation is being sorted out so you can report damaging and fraudulent information as it appears.

"You can also add a fraud alert to your credit report," Ross says.

2. You've never done so before

Fraud is definitely one reason credit newbies should pull that report, but it's certainly not the only instance where what you don't know can hurt you. Studies have found as many as four in five credit reports contain errors and that 25% of these mistakes are egregious enough to cost someone a loan. Not all errors are related to fraud.

"There are people that are inputting data, and they can make mistakes," Ross says. "If that happens, you need to make sure you address the problem."

Catching mistakes close to when they appear is especially important, because some errors aren't easily fixed. (Read on to learn how to dispute information with the major credit bureaus.)

3. You're getting ready to shop around for a loan

It's a good idea to pull all three versions of your credit report (with the scores included) just before you go shopping for a new loan or line of credit. This will pre-empt any unwelcome surprises.

"The last place you want to be surprised about your credit score is when you're closing on your home," McClary says. (Many mortgage lenders will conduct a second credit check right before the house changes hands, and fluctuations in your scores can affect the loan's terms and conditions.)

It can also help you gauge whether you should even be in the market for a loan, since low credit scores can lead to high interest rates or a rejection. While the rejection itself won't cause your scores to drop further, the credit inquiry can.

"If you are planning to purchase a home and you are in a range of 720 or more, you're in better shape than most," Ross says. "If not, looking for ways to improve will be your next step."

4. You've co-signed a loan

Co-signing occurs when a third party helps an otherwise unqualified borrower get a loan or line of credit by signing for the loan. The practice is especially common among parents who help their children get credit cards, but a co-signer can also be used to help obtain a mortgage or car loan.

Some people may not realize this, but co-signers are responsible for upholding the terms and conditions associated with the contract, even if they aren't actively reaping its benefits. That means you are agreeing to repay the debt if the primary borrower does not. Any missed payments or, worse, defaults will appear on your credit report and have a negative impact on your scores. (On the plus side, the other person's responsible behaviors can give your scores a boost.)

Either way, "you want to check periodically the primary is paying as agreed," McClary says. If they aren't, you may have to intervene to prevent the line of credit from doing big damage to your scores.

5. You want to know how to improve your score

If you suspect your score is not so hot, it can help to request a report from one of the three major credit reporting agencies -- Equifax, Experian and TransUnion. Most versions of a credit report include information on what is helping your scores and what is hurting them. This information can give you a sense of what actions you will need to take in order to boost your scores. For instance, a report might show that your credit-to-debt ratio is too high, which would mean you should pay down any debt you're carrying in order to boost your scores.

Often, reports also break down the major components of all credit scores.

"Understand what makes your score up and learn how you can improve in those areas," Ross says.

Checking your credit consistently won't cause your scores to drop; personal inquiries don't appear on your credit report.

Click here to become a fan of MSN Money on Facebook

More from Credit.com: