A credit monitoring service can alert you if your social security number is used to open a new line of credit, if you’re the victim of identity theft, or even if there’s unauthorized activity on your credit cards. There are services in the marketplace that offer these services for a monthly fee, while other providers allow you to enroll in credit monitoring services for no charge. Below, find out more about the benefit of credit monitoring and how you can choose the right service for yourself.
Why credit monitoring is important
Whether you choose a free or paid credit monitoring service, Rod Griffin, senior director of public education and advocacy for Experian, says signing up for credit monitoring can provide peace of mind and tangible support for improving your financial health. “A big part of being financially healthy is wisely managing your credit,” he says. “While you can do this by regularly checking your credit score and credit report as well as monthly statements, a credit monitoring service can be an extra help so you can keep a close eye on your financial activities and how those activities affect your credit score—such as opening new accounts, high credit card balances, missed payments, applying for new credit, and more.” Griffin explains all of these activities can affect credit scores, and getting updates when they occur can help you respond more quickly and work toward maintaining a positive credit history. Additionally, most credit monitoring products offer extra benefits which you can leverage to be even more financially savvy. “Those benefits may include credit monitoring and alerts to help respond rapidly to identity theft, loan calculators and payoff tools to help manage debt, and credit score simulators to help provide specific actions to increase credit scores over time,” Griffin continues.
Who is the best candidate for a credit monitoring service?
Griffin says credit monitoring services can be a helpful tool for all consumers with a credit history, which are persons at least 16 years of age. “Credit monitoring services can help anyone who wants to understand their credit score, explore the potential impact of financial decisions before they make them, and proactively monitor their personal information,” says Mili Mittal, VP of CreditWise with Capital One. But, do you really need the service? If you’re someone who easily stays on top of monitoring your credit on your own, it might not make sense to outsource a task you already do yourself. However, if you know that you’re not so good at self-monitoring, seeking out or paying for a service to do it for you can be worth it.
How can you choose the right service?
Before deciding on a credit monitoring service, it’s important to understand exactly what it offers and whether the service meets your needs. Griffin explains that a good product provides access to your credit score, the risk factors that explain what is most affecting the score, and a credit report from multiple credit bureaus. Services with three-bureau credit monitoring ensure that you’re fully protected. Some services offer additional credit scores for specific industries, like auto lending, to provide further insight to someone planning a specific purchase. To choose the best service for you, consider whether you can afford to pay a premium to get access to extra features, or, if a free service would be better for your budget. If you opt for a free service, there is no harm in enrolling with multiple providers, to ensure that you’re fully covered, Griffin says.
How much do credit monitoring services cost?
Credit monitoring products can be offered for free or for a fee. Most commonly, the fee is paid in monthly payments. “Credit monitoring services often cost between $10 and $30 per month, which can really add up,” cautions Ted Rossman, senior industry analyst for Bankrate.com and CreditCards.com. You may also already have access to free credit monitoring services through your bank or credit union, credit card issuer, employee benefits plan, insurance plan, or organizations such as AAA or AARP. Victims of data breaches are also often eligible for free credit monitoring for a period of time. So, make sure to check all the options available to you before you decide to pay for a service.
Understanding the limits of credit monitoring services
Rossman says that although credit monitoring services provide a notification, it’s important to realize that it’s not a prevention mechanism. Credit monitoring services can’t prevent identity theft or credit card fraud, they can’t block phishing emails or keep someone from applying for credit in your name. For this reason, Rossman doesn’t personally believe it makes sense to pay for credit monitoring. “These services merely alert you that something bad has happened—they don’t prevent it from happening in the first place,” he says.
What else can you do to protect your credit?
Because credit monitoring services can’t prevent predatory activity against your credit, it’s important to know other ways to protect your financial health. Rossman says you should practice good data habits such as avoiding suspicious emails, shredding personal documents, and refraining from conducting sensitive business on public Wi-Fi networks. Freezing your credit and using strong passwords are more ways to protect yourself against identity theft. Ultimately, when it comes to protecting your credit, it’s important to know yourself and your habits. There’s no shame in using a service if you need help staying on top of monitoring or if you just want that extra layer of security to keep you in the know.
