What is credit monitoring?
Protect your credit score and prevent fraud with this process
In a world of increasing financial scams, credit monitoring can be an important part of maintaining your financial health. Credit monitoring can alert you to fraudulent activity on your credit report, which reflects your financial history and responsibility. Ensuring its accuracy will ultimately keep your credit score from unwarranted hits.
Find out how to get this additional layer of security for your finances.
Key insights
- Credit monitoring tracks your credit report for any suspicious changes, such as opening new accounts or unauthorized credit inquiries.
- Timely alerts provided by credit monitoring services enable you to detect unauthorized activities as soon as they occur to help you prevent further damage.
- While you can do this yourself for free, credit monitoring services are faster at detecting issues and constantly tracking for new threats.
Credit monitoring defined
Credit monitoring watches your credit report to ensure no new or unauthorized activities could compromise your financial health. You can monitor your credit yourself or use a paid service to do it for you.
Monitoring your credit yourself involves obtaining credit reports from each major credit bureau (Equifax, Experian and TransUnion) and carefully examining them for discrepancies. But this method can be time-consuming, especially since you’ll need to request and review reports from each bureau separately.
Alternatively, a paid credit monitoring service offers real-time alerts whenever there are significant changes to your credit report. Some even offer identity theft insurance, which can help cover the costs associated with recovering your identity if you fall victim to fraud.
» MORE: How to check your credit score
How does credit monitoring work?
Credit monitoring is the continuous tracking of the following activities:
- New accounts: Any time a new credit account is opened in your name
- Credit inquiries: Any time someone requests your credit report, such as a lender or creditor
- Account balance changes: Informs you if there are significant changes in your account balances
- Payment history: Alerts you to missed or late payments
- Public records: Notifies you of any new public records, like bankruptcies or tax liens, which could affect your credit
If you use a credit monitoring service, you’ll receive an alert for the above actions. If you see suspicious activity, it’s important to immediately take action by disputing it with the lender or credit bureau. In some cases, you’ll need to place a fraud alert or security freeze on your credit report.
What does credit monitoring do?
What does credit monitoring not do?
It also can’t tell you if fraud has taken place on existing accounts in the past. For example, if you sign up for credit monitoring today, the service won’t be able to alert you if there was a fraudulent inquiry three months prior.
Credit monitoring may not detect identity theft related to other aspects of your life, such as medical records, tax filings or online accounts.
Pros and cons of credit monitoring
While credit monitoring can’t catch every type of fraud, it’s a good idea to use it to stay vigilant against threats. Consider these pros and cons when deciding if a credit monitoring service is right for you.
Pros
- Early detection: Credit monitoring helps you identify suspicious activities and changes in your credit report quickly.
- Convenience: Using a credit monitoring service will alert you in real time if there’s an issue with your credit.
- Track all three bureaus: Many credit monitoring services track all three major credit bureaus, providing a broader view of your credit activity and potential issues.
Cons
- Cost: Some basic credit monitoring services are free, but more comprehensive plans come with a monthly or annual fee.
- Limited prevention: Credit monitoring doesn’t stop identity theft or fraudulent activities from occurring.
- It can’t fix mistakes: You’ll need to contact the lender or credit bureau to fix any issues with your credit report.
» MORE: How to check for identity theft
Credit monitoring vs. credit reporting
Credit reporting happens when creditors and lenders share information about you with the credit bureaus. It’s a record of your credit activities and transactions and can affect your credit score for better or worse, depending on what the bureaus report. You want creditors and lenders to report to the credit bureaus regularly about on-time payments because that plays a huge role in your three-digit credit score.
Credit monitoring is slightly different because your credit report and usage are actively monitored, looking for suspicious activity or unauthorized transactions. This tracking is done in real time so that you can dispute issues or freeze your account to prevent issues.
» MORE: How long does a collection stay on your credit report?
Credit monitoring vs. identity theft protection
“Credit monitoring services watch your credit reports for any changes, like a credit pull, that could indicate fraud and alert you when they occur,” said Rebecca Morris, founder of the blog Safe Not Scammed.
Morris said that identity theft protection services are more comprehensive than credit monitoring.
“While they often include credit monitoring as a component, they also usually monitor the dark web, court records, the sex offender registry and change-of-address records for any signs of identity theft,” she said. “Additionally, they offer assistance if your identity is stolen and insurance to cover some of the associated costs.”
» MORE: How to prevent identity theft
Additional ways to protect your credit
In addition to credit monitoring, there are other steps you can take to protect your credit and financial accounts.
Use two-factor authentication
While it’s tempting to use the same password for all your accounts for the sake of convenience, your financial accounts should have strong and unique passwords. Use two-factor authentication whenever possible for an extra layer of security. It doesn’t add much additional time when logging in.
Never share personal information
No financial institution will ever request your Social Security number or other sensitive personal information over email or text. Scammers often send emails or texts to trick you into thinking something is wrong with your account.
When in doubt, open a new browser window to check or call your bank directly. Never click on a link given to you.
Keep your software updated
Regularly update your software and security patches on your devices to protect against malware and other cyber threats. Be cautious when using public Wi-Fi networks, as they can be vulnerable to hacking attempts.
FAQ
How do I know if I need a credit monitoring service?
You might consider a credit monitoring service if you want real-time alerts about changes to your credit report, particularly if you're concerned about potential identity theft or fraud.
How much does credit monitoring cost?
The cost of credit monitoring varies depending on the provider and the level of service you choose, ranging from free options to around $10 to $30 per month for more comprehensive plans.
Can credit monitoring prevent identity theft?
Credit monitoring can't prevent identity theft, but it can help you detect suspicious activities early. Acting quickly on a credit monitoring alert can save you from identity theft.
Is credit monitoring the same as credit freezing?
No. Credit monitoring tracks your credit report for changes and alerts you, while credit freezing restricts access to your credit report, making it harder for fraudsters to open new accounts. If you receive an alert of fraud through credit monitoring, you might need to pursue credit freezing to protect yourself.
How often should I check my credit score if I have credit monitoring?
With credit monitoring, you receive alerts about changes in your credit report, so you might not need to check your credit score as frequently. However, reviewing your credit report at least annually for accuracy is still a good idea.
Bottom line
Whether you monitor your credit yourself or pay for a professional service, staying proactive is the key. Remember, credit monitoring is a valuable tool, but it's not a guaranteed shield against all threats. It’s your responsibility to take swift action against fraudulent or suspicious activity alerts to keep your credit safe.
Article sources
- Consumer Financial Protection Bureau, “ What is a credit monitoring service? ” Accessed Aug. 14, 2023.
