What Is Credit Monitoring?
Credit monitoring services are designed to alert you to activity on your credit file. They typically send notifications when new credit applications are made in your name, such as opening a new credit card or adding an authorized user to an existing account. Additionally, you’ll receive alerts when changes occur to your credit score or credit reports.
These services may provide alerts about large transactions, increases in your credit limit, and changes to your personal information, such as your address. The primary benefit of credit monitoring is early detection: it allows you to react quickly if someone is attempting to use your data. This early warning can potentially prevent significant damage and complications from identity theft, whereas waiting months or years to find out can be costly.
If your personal data has been compromised, you face a lifelong risk of identity theft. However, there are proactive ways to protect yourself, and signing up for a credit monitoring service is one of them.
Are Credit Monitoring Services Worth It?
The value of a credit monitoring service hinges on your willingness to actively monitor your credit. You can conduct your own credit monitoring without incurring any costs. Additionally, you can prevent fraud risks by using a credit freeze.
Free Credit Monitoring Options
There are several steps you can take to protect your credit:
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Credit Freeze: This blocks access to your credit reports. Experts consider this the strongest protection from criminals accessing your credit without your permission. You can freeze and unfreeze your credit either online or by phone through the three major credit reporting agencies: Equifax, Experian, and TransUnion.
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Review Your Credit Reports: You can acquire free credit reports weekly from the three credit reporting agencies by using Annualcreditreport.com, a secure government-sponsored website. If you find any discrepancies, you can dispute these errors.
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Fraud Alert: Consider adding a fraud alert to your credit file. When a fraud alert is active, potential lenders are required to contact you and verify your identity before approving any new credit applications in your name. The basic fraud alert, which is free, lasts for one year and is renewable. An extended fraud alert, valid for seven years, is available for identity theft victims who have filed reports with the Federal Trade Commission. It’s also renewable, but after seven years, you’ll need to resubmit paperwork. Initiating a fraud alert with one credit bureau will alert the other two, who will place similar fraud alerts on their systems.
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Bank, Employer, or Credit Card Issuer: Check to see if your bank, employer, or credit card issuer provides free credit monitoring services.
Paid Credit Monitoring Services
If you anticipate that you might not consistently monitor your credit on your own, or if you’re willing to spend money for additional safeguards, you might consider paid credit monitoring services. You should look for services that offer three-bureau credit monitoring and a full suite of theft alerts. These plans typically cost over $200 annually for individual plans, and some family plans are priced above $300.
Paying for a service may be a sensible decision if:
- You are already a victim of identity theft or are at a high risk, such as if your Social Security number has been exposed in a data breach or you’ve lost your Social Security card.
- You prefer not to freeze your credit reports.
- You know that you would be unlikely to consistently monitor your credit.
Before signing up for a paid service, carefully review the terms, including the features offered, the cancellation process, and your rights if the service fails to protect you. Look for a service that explicitly provides “three-bureau credit monitoring.” If a service only covers one credit bureau, your protection is incomplete.
Avoiding Credit Bureau Products
When purchasing credit monitoring, it’s generally advisable to steer clear of the offerings from the credit bureaus themselves. Here’s why:
- Limited identity theft coverage: Despite being priced similarly to other companies, these services may not offer very comprehensive identity theft coverage.
- Arbitration clauses: Credit bureau monitoring plans typically contain an arbitration clause in their terms of service. This implies that, upon signing up, you’re waiving your right to a class-action lawsuit and consenting to binding arbitration, which is often considered unfavorable to consumers.
Recognizing the Limitations of Credit Monitoring
While services often market themselves as safeguards for your credit profile, it’s crucial to understand their limits. Keep in mind that credit monitoring services can’t:
- Prevent identity theft or credit card fraud.
- Prevent you from receiving phishing emails or keep you from opening them.
- Stop someone from applying for credit in your name.
- Correct errors in your credit report.
- Prevent taxpayer identity theft.
Although credit monitoring provides helpful alerts, proactively restricting access to your credit reports by placing a credit freeze with all three credit bureaus offers an additional, robust protection layer that is free and won’t affect your credit score. By combining a credit freeze with a fraud alert and regular credit report checks, you can stay ahead of potential financial threats.
