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What is a credit monitoring service?

Today, we’ll walk you through the basics, highlight the differences between credit monitoring and identity theft protection (two terms often used interchangeably), then wrap up with some general tips anyone can use to secure their credit accounts and online identity.

What is a credit monitoring service

In an age where data breaches are commonplace, you may ask “what is a credit monitoring service, and how can it help me?” In the year of 2019, the threats facing your personal information are greater than ever before — data breaches are up by as much as 500% from a decade ago. In fact, the 2018 Consumer Cybersecurity Study found that 34% of U.S. consumers had their personal data exposed last year — so clearly it can happen to anyone.

But the good news is that our defenses have improved, too. There are many tools available to help you stay “in the know” about your credit and other personal data — like a credit monitoring service, for example. But what is a credit monitoring service? Is it different from an identity theft protection service? Do you need one or the other? When might you need credit monitoring — and when might you need something more? Read on for answers to these questions and more!

The basics of credit monitoring services

The short answer to the question that brought you here is a simple one: credit monitoring is a service that alerts you whenever there’s a change made to your credit reports. They can be free or paid and as a consumer, you can use them to protect yourself against identity theft, because any credit activity — like the establishment of a new account or a hard credit inquiry — will show up, and if it looks suspicious you’ll be alerted to it by your credit monitoring service. Many services also keep track of your credit scores, helping you stay up-to-date on the quality of your credit.

Essentially, it provides you a way to be notified of any behavior that could potentially be fraud, so you can act quickly and take the necessary steps to reduce any damage to your credit and identity.

Credit ‘monitoring’ vs. ‘identity theft protection’

Although you may hear the terms used interchangeably, “credit monitoring service” and “identity theft protection service” are technically two different things, although one that falls under the latter may call itself the former. To clarify, let’s dig in further:

Credit monitoring

As we said, a credit monitoring service will alert you if there are any changes made to your credit reports, especially if it looks like someone is attempting to apply for an account in your name. Credit monitoring can be especially helpful if you have lower credit scores and are working to improve them, as you can observe the effects your efforts have on your scores.

But that being said, credit monitoring has some limitations. Most primarily monitor only your credit file activity at 1-3 credit reporting agencies, alongside your credit score. Some will report potentially fraudulent credit card charges in addition to hard credit inquiries, but not all. And that’s just the start of what credit monitoring cannot do:

  • Can’t prevent identity theft
  • Can’t stop phishing emails, or you from opening them
  • Can’t keep someone from applying for credit in your name
  • Won’t correct errors on your credit report
  • Won’t stop taxpayer identity theft

These limitations don’t make credit monitoring bad, per se — credit monitoring is just that: monitoring of your credit reports and scores.

Identity theft protection

Identity theft protection services often include credit monitoring as a service, but generally, provide much more. While a credit monitoring service may simply watch your credit report and notify you if there are any suspicious activity that appears there, identity theft protection services do much more: they watch for fraudulent activity in your bank accounts, credit cards, in criminal databases, and any other places where your Social Security number is used. Many provide you with assistance to help fix the problem if one occurs (“Restoration” services), alongside other services:

  • Credit activity on 1-3 credit reporting agencies
  • Credit score
  • Change in mailing address requests
  • Court/arrest records
  • Payday loan applications
  • Check-cashing requests
  • Monitoring of the Dark web and other sites where personal information is sold or traded
  • Orders for new utility, cable, and wireless services
  • Social media monitoring
  • And more

Some banks or insurance companies provide identity theft protection services for an additional fee, or you can use an independent company, like LifeLock.

Do you need credit monitoring, or can you do it yourself?

Given the data we mentioned earlier, it’s a smart idea for everyone to keep an eye on their credit. So the real question is, how far do you take it? Can you do it yourself? Do you need a credit monitoring service? First, let’s look at what you can do yourself.

Being your own credit monitor

You can monitor your credit yourself. If you’re a U.S. citizen, you’re entitled by law to 1 free credit report from each of the 3 major credit reporting agencies — Equifax, Experian, and TransUnion — every 12 months. If you space the requests out, you could have a free credit report every 4 months — 1 from each agency. If you find any errors, dispute them.

You can also get free credit score reporting by signing up for services like Credit Karma, NerdWallet, and many others that are available. Finally, the best way to reduce your risk of a criminal accessing your credit is to apply a credit freeze by contacting one of the 3 major bureaus.

Getting a credit monitoring service

Being that you can technically monitor your own credit — using the information in the last section — the primary reason to use a credit monitoring service is for more frequent reporting. If you are trying to improve your credit score, have many credit cards, or want to keep an eye out for unusual credit activity under your name, a credit monitoring service could be a good investment to make. Keep a few things in mind in your research if you decide to investigate this avenue further:

  • Does the company you’re looking at provide reports from all 3 major credit bureaus?
  • Does the service report on fraudulent credit card activity?
  • Breached companies (like Equifax) often provide credit monitoring for free, for a specified duration of time.

When to get identity theft protection

Again, there are limitations to credit monitoring — both DIY and from companies offering the service. So when do you need something more than just monitoring? The biggest reason to go beyond credit monitoring and subscribe to an identity theft protection service is if you have been the victim of identity theft in the past. The second-biggest reason is if you’re concerned about yourself, your significant other, your children or other loved one’s identity being stolen due to a specific incident or series of risky behaviors.

It can take months or years to unravel the mess caused by a stolen identity. There are many important steps to take, like filing a police report and placing initial fraud alert on your credit — just to start. Having identity theft protection — whether before or after it happens — can help guide you through the process of restoration of your identity.

Credit monitoring tips

While credit monitoring services give you timely information, it’s up to you to act on that information. Ideally, credit monitoring is just one “cog” in your protection plan (see identity theft protection”). Regardless, to maximize the effectiveness of your credit monitoring, follow these tips:

1. Don’t do free trials

If you’re going the “free” route avoid companies that offer free trials. Many automatically enroll you in a monthly subscription that charges you once the free trial ends. While this makes sense from a business standpoint, many are difficult to cancel. It’s better to go completely free, or with the mindset of paying for the service (regardless of whether they offer a free trial).

2. Tailor your notifications

For your credit monitoring to be effective, it needs to fit your life and preferences. If you’re more likely to check text messages than email, sign up for service that offers text alerts. Likewise, the opposite is true: if you prefer email, setup your alerts to send you an email instead.

3. Act on suspicious activity

You have credit monitoring for a reason — so act on it. If you receive an alert, act on it. Make a habit out of dealing with it immediately. If it turns out to be a fraudulent charge, the sooner you begin taking steps, the better.

4. Apply a credit freeze

As mentioned briefly, the 3 major credit bureaus (Equifax, Experian, and TransUnion) allow you to “freeze” your credit report. In exchange for freezing your report, you get a PIN which must be given in order for your credit report to be released. No unauthorized person can access it, making it impossible for fraudulent people to open new accounts using your identity. If you’ve been a victim of identity theft, you can freeze your reports for free; otherwise, it’s just $10 at most per freeze, although that varies depending on your age, military affiliation, state, and other variables.

5. Place a fraud alert

You can also place a “fraud alert” on your credit reports through the major credit agencies. It lasts for 90 days, can be renewed automatically or manually, and prevents any new credit accounts from being opened without your permission. It also gives you an additional free credit report from that bureau that doesn’t count against your free yearly.

Conclusion

Given the prevalence of identity theft and fraud, it’s essential that you keep an eye on your credit activity. Understanding what a credit monitoring service is can help you decide if you want to accept or invest in one — and if a company offers your free credit monitoring, it doesn’t hurt to take advantage of it and may actually help you out. In this post, we explained just what credit monitoring is, what it covers — and doesn’t — and when you should use a service.

Have you used a credit monitoring service in the past? Did it help? Was it worth it? Share your experience in the comments below.

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