What is Credit Monitoring?
Credit monitoring services alert you to changes in your credit profile. These services typically send notifications when a new credit account is opened in your name, an authorized user is added, or your credit score or credit report changes. Other alerts may include notifications about large transactions or changes to your personal information such as your address.
The primary advantage of credit monitoring is that you’re notified quickly if someone is attempting to use your identity, which is preferable to discovering fraudulent activity months or even years later. The sooner you know, the quicker you can mitigate the damage, which can include significant financial and personal complications.
If your personal information has been compromised, there’s a lifelong risk of identity theft. However, you can take proactive steps to protect yourself, including signing up for credit monitoring, which can add a layer of security and peace of mind to your finances.
Are Credit Monitoring Services Worth the Cost?
The value of a credit monitoring service depends on how much effort you’re willing to put in yourself. You can monitor your credit for free, and in some cases, you can even prevent fraud through actions such as freezing your credit.
Free Credit Monitoring Options and Other Protective Measures
Here are ways to protect your credit and personal information:
- Credit Freeze: This is the most robust method to block access to your credit reports and prevent unauthorized use of your credit. You can freeze and unfreeze your credit online or via phone calls to the three major credit reporting agencies: Equifax, Experian, and TransUnion. This doesn’t hurt your credit score.
- Review Your Credit Reports: You can obtain free credit reports weekly from the three major credit reporting agencies through Annualcreditreport.com. If you detect any errors, you can dispute them.
- Fraud Alert: A fraud alert notifies potential lenders to verify your identity before a new line of credit is opened in your name. The initial alert is free and valid for one year, but it can be renewed. An extended fraud alert, valid for seven years, is available for identity theft victims who’ve filed reports with the Federal Trade Commission. If you place a fraud alert at one credit bureau, the others are generally informed, and alerts are placed on their systems as well.
- Check for free credit monitoring: Your bank, employer, or credit card issuer may offer free credit monitoring.
Paid Credit Monitoring Services
If you feel you won’t follow through with self-monitoring or want to invest in extra protection, paid credit monitoring might be beneficial. Look for services that offer credit monitoring from all three bureaus and a comprehensive set of theft alerts. The services usually cost over $200 annually for individual plans and more for family plans. This expense might be a good idea if:
- You’re already a victim of identity theft.
- You are at high risk of identity theft, such as having experienced a data breach exposing your Social Security number or having lost your Social Security card.
- You do not wish to freeze your credit reports.
Before subscribing, understand the services offered, the cancellation process, and your rights if the service doesn’t protect you. Look for services that explicitly promise “three-bureau credit monitoring.” If a service covers only one credit bureau, you are only getting partial protection.
Avoid Credit Bureau Products
It may be wise to avoid credit monitoring services offered directly by the credit bureaus. These services :
- May not deliver significant identity theft protection, despite potentially costing as much as other service providers.
- Often include an arbitration clause in the terms of service, meaning you waive your right to a class action lawsuit and agree to binding arbitration, something generally considered unfavorable to the consumer’s interests.
The Limits of Credit Monitoring Services
While credit monitoring services market themselves as safeguards, they have specific limits and are therefore not foolproof.
What even the best credit monitoring companies can’t do:
- Prevent identity theft or credit card fraud.
- Keep you from receiving or opening phishing emails.
- Stop someone from applying for credit in your name.
- Correct errors on your credit report.
- Prevent tax identity theft.
Credit monitoring is a helpful tool. However, proactively blocking access to your credit reports through a credit freeze with all three bureaus gives extra protection that is free and won’t negatively impact your credit score. Pair a credit freeze and a fraud alert with regular credit report reviews to stay ahead of any issues.
