The Benefits of a Credit Monitoring Service & Do You Need to Pay For One?

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:

• What credit monitoring is
• What credit monitoring does
• The best and most important credit monitoring services
• The cost of credit monitoring
• Who should pay for credit monitoring

What Does Credit Monitoring Do?

Credit monitoring has two main uses.

• First of all, there’s the simple utility in always knowing how your use of credit is affecting your credit score.
• Then there’s also the added security you get from monitoring your credit transaction history.

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.

Credit Monitoring Can Help You Avoid Identity Theft

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:

• People listening into phone calls where you divulge your credit card number
• Receiving pre-approved credit cards in the mail but discarding them without removing the enclosed materials

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:

1. As it often goes, someone activates a credit card under your name. They have your details including your full name and mailing address. They activate your card and max out your credit limit. You don’t know what’s going on until weeks later when the card provider finally reaches out to you to discuss the matter.
2. The same scam takes place, except you have credit monitoring. You are alerted to the opening of a new credit account (credit card). You know you didn’t open a new credit card yourself, so you promptly call the card provider and deactivate the account.

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.

What are the Big Three Credit Monitoring Services?

There are 3 major credit reporting bureaus in the US:

• Experian
• Equifax
• TransUnion

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.

Best Credit Monitoring Service

There are a few great credit monitoring services. The best ones have the following characteristics:

• They monitor all three reporting bureaus so you don’t miss anything
• They use the FICO model instead of VantageScore (FICO is used by most lenders)
• Dark web scanning is available to detect conspiracies to commit fraud against you
• Lastly, they offer identity theft insurance

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.

Is Credit Monitoring Expensive?

Not particularly.

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.

Conclusions: When is it Worth it to Buy Credit Monitoring?

Credit monitoring is good for anyone who wants to:

• Stay on top of and improve their credit score
• Stay protected from one of the most common identity theft consequences

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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