Credit Monitoring: What It Is And Why You Should Have It

We urge everyone to check their credit reports regularly. Anyone can get a free credit report annually from annualcreditreport.com, from each of the three credit bureaus. That means three times per year you can check one of your credit reports at no cost.

But some people need to check their credit more frequently. For them, credit monitoring services are a good option. With credit monitoring, you are alerted if your credit report changes. If the change is due to your legitimate activity, then you have no problem. But if the change is due to fraudulent activity, you will be able to act quickly to respond to the situation.

What is Credit Monitoring?

Generally, you are notified by the credit monitoring service by email, text, or phone call when certain financial transitions occur:

  • A new account is opened in your name. If you didn’t just open a new account and this happens, it’s a sure-fire sign of identity theft, and you should immediately take steps to secure your identity.
  • You have late or missed payments. If you have an old account you don’t use anymore, you might not think to check that statement. But if an identity thief uses it, you may find out when your credit monitoring service lets you know about the missed payment.
  • You have new inquiries for credit. Even before the account is opened, an application for credit or a loan will result in a “hard” inquiry to your credit—this is a sign that someone is trying to get credit in your name.
  • There are changes to your address or employment information. If someone is trying to re-route your credit card statements to a new address, credit monitoring will alert you before it’s too late. And you’ll know if someone is using your identity to get a job. This kind of fraud is more common than you might think—people who are barred from working legally or can’t pass a background check will use stolen identities. And they could leave you on the hook for their payroll and income taxes.
  • You have a tax lien, judgment, or bankruptcy on your report. If someone uses your identity in a way that leads to a tax lien or declares bankruptcy using your information, the situation is potentially very serious, and with credit monitoring you’ll find out about it right away.

What is Identity Protection?

  • Identity Theft Protection. A full-fledged ID theft protection service will include credit monitoring, but there’s more to ID theft than just credit reports. ID theft protection will typically go much further than credit monitoring by alerting you to activity on more than just your credit reports. Things like social media activity, postal mail forwarding, arrest records, new utility services, and cellular accounts might be caught by an ID theft protection service, but not by credit report monitoring. Bear in mind, though, that the vast majority of ID theft activity is credit-related, and it’s rare that you’ll have ID theft that doesn’t show up on your credit reports.
  • Stop things that haven’t happened yet. It can be very hard to prevent fraudulent activity on your credit file. Credit monitoring alerts you after the activity when the changes hit your credit reports. It won’t detect fraud before it happens, or prevent theft altogether. It’s there to let you know immediately when something changes so you can respond quickly. In many cases, this is the best you can do—finding out quickly lets you respond right away and limit the damage done.
  • Do anything you can’t do yourself. It’s important to note that you can monitor your own credit without employing a service to do it for you. But let’s face it, there’s no way you’re going to check your own credit report every day. A monitoring service will pay constant attention so you don’t have to. Just because you can do it yourself doesn’t mean you necessarily want to: everyone can file their own taxes, but 56% of taxpayers use tax preparation services rather than doing it themselves.

Why You Need Credit Monitoring

EVERYONE needs credit monitoring. The only question is whether you do it yourself or use a 3rd party.  Many people can check their free reports annually and get by just fine. But sometimes, people have situations that require more diligent monitoring and having a credit monitoring service becomes a good idea.

  • You’ve suffered from ID theft. If you’ve already been victimized by an ID thief, your information is out there and could be used again at any time. Many people who deal with ID theft have ongoing problems that can persist for years.
  • You were part of a data breach. Even if your ID hasn’t been stolen, if you were part of a data breach, your information is in the hands of people who may sell it or abuse it given the chance. Not sure if you’ve been part of a data breach? Sorry, but you almost certainly have. When Equifax was breached last year, over 140 million consumers were exposed. If you have credit accounts of any kind, that probably includes you.
  • You won’t do it yourself. You may not have the time or energy to monitor your own credit, and if you’re concerned about your security, then having a credit monitoring service is better than not doing it at all. And if doing it yourself isn’t a realistic expectation, then you have your answer.
  • Advice from a credit report reviewer. If you’re getting ready to make a major purchase, like a new home, we recommend a credit report review. This isn’t an ongoing monitoring service, it’s a one-on-one “deep dive” into your credit report with a certified credit report reviewer. This financial expert will go over your credit with you, help you understand what’s in it, and what it says about you. Depending on what you learn in this review session, the reviewer might recommend credit monitoring. If they see something that concerns them, you should listen and follow their advice.

Things to Watch Out For

A couple of things to bear in mind when considering credit monitoring:

  • Your score is separate from your report. Credit monitoring may not include your credit score, and that’s OK. In fact, it’s probably best that you don’t worry about your score when you’re having your credit monitored. If you are getting ready for a major loan or purchase, then a credit report review will include your credit scores. If your credit report monitoring includes a free score, that’s fine, but not necessary.
  • Make sure all 3 credit reports are included. Some credit monitoring services are offered by one of the three credit bureaus themselves. In these cases, you’re only getting one of your 3 reports monitored. Whoever you use for credit monitoring, make sure all three credit reports are included.
  • Watch out for free trial tricks. Some credit monitoring services start as a free service and then quietly sign you up for an expensive subscription that is hard to cancel. Only use a reputable service that discloses the real costs of credit monitoring up front.

If you’ve got concerns about ID theft, we can help. Start with our free downloadable guide to Identity Theft Prevention (which includes information about recovery after you’ve been a victim). Get that now from our downloads page. And if you’ve got questions or concerns about your credit report, a Credit Report Review is your best bet.

Speak to our certified Debt Coaches to review all of your options and discuss best strategies for getting out of debt.Speak to our certified Debt Coaches to review all of your options and discuss best strategies for getting out of debt.
Melinda Opperman

About The Author

Melinda Opperman is an exceptional educator who lives and breathes the creation and implementation of innovate ways to motivate and educate community members and students about financial literacy. Melinda joined credit.org in 2003 and has over 19 years experience in the industry.