Understanding the credit reporting system makes navigating personal finance so much easier.
Your credit score and reports help determine the outcomes of some of the most important steps in your life. If you plan to buy a home or car anytime in the future, your credit can make a huge difference in what you have to pay for them.
All Americans (and Canadians) are entitled to a free credit report from each major bureau once per year. However, the basic credit reporting services you are entitled to may not be enough.
Sometimes credit plays a bigger role in your life than at other times. For example, if you want to start a business or stretch your budget to buy a nice home, you may want to maximize your credit score first.
So, in this guide we will go over:
Credit monitoring has two main uses.
Credit monitoring services track your credit history, constantly give you reports, and alert you to any new credit activity.
In terms of the first use, you can always know how your actions affect your score.
For example, if you missed a credit card payment and your score has been harmed, you will be alerted. Then you will also see the corresponding effect on your credit score. In this way, you can constantly stay on top of your credit.
Some of the biggest promoters of credit monitoring services are cybersecurity professionals and institutions. There’s a good reason for this. According to the FTC, consumers made 2.2 million fraud reports to them in 2020. Other institutions reported far more.
What drives people to commit identity theft? According to many institutions, starting with the US Department of Justice, the answer is obvious. Access to your money, which normally means your credit cards.
Typical identity theft cases involve either application fraud or account takeover. Some specific examples could include:
Credit monitoring services can help you detect these kinds of issues early and avoid the headaches and damage that can be caused. As a case example, imagine:
Cornell Law School perhaps put it the most succinctly by explaining how fraud schemes like these are only truly serious when left unchecked for a long time. The faster you know about fraud targeting you, the less damage will typically be done.
There are 3 major credit reporting bureaus in the US:
Each bureau can provide you with one free annual credit report, which you are legally entitled to. However, for a fee, they also offer ongoing credit monitoring services.
There are also many businesses that sell credit monitoring services. Their credit monitoring is based on the work of the big 3 credit reporting bureaus. However, they often offer additional services such as identity theft prevention and coverage.
You may also be able to get a better deal for the money you pay. For example, while some companies charge roughly the same as the reporting bureaus, they won’t offer much ID theft coverage and they may include arbitration clauses.
There are a few great credit monitoring services. The best ones have the following characteristics:
There are quite a few great credit monitoring services that offer a mix of the above. Make sure you check for these details before making a final decision and subscribing to credit monitoring services.
Credit monitoring rates vary based on the service package you purchase. They generally range from $8.99 to $39.99 per month.
The more comprehensive service packages will naturally cost more than their more basic alternatives.
Credit monitoring is good for anyone who wants to:
It’s hard to provide a specific use case of when credit monitoring should be considered more necessary.
It’s simply a great way to track your credit and protect yourself from fraudsters. If these benefits are worth $10 to $40 per month for you, then you would probably find it worth it to subscribe to a credit monitoring service.
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