What Is Credit Monitoring and Is It Right For You?

Credit monitoring is one of the most effective tools when it comes to preventing a major financial catastrophe. It protects you against fraudulent credit activity and ensures you may never have to tread through the murk of credit repair.

The goal of this article is to help you understand the ins and outs of credit monitoring and empower you to use this helpful tool to your advantage.

What is Credit Monitoring?

In simple terms, credit monitoring is an active awareness of your credit account activity. You can monitor your credit on your own or enroll in a credit monitoring service that tracks changes to your creditworthiness for you. Usually, most people opt to pay a monthly subscription fee and have a credit monitoring company do the leg work for them.

If you are self-monitoring your accounts, then your credit monitoring process may include:

  • Weekly reviews of your credit card spending activity
  • Weekly reviews of your bank account statements
  • Automatic alerts on each of your credit accounts to notify you of changes made to your accounts
  • Annual reviews of your credit reports from the three main credit reporting agencies – Experian, Equifax, and TransUnion

5 Reasons to Enroll in a Credit Monitoring Service

While self-monitoring your credit can seem appealing, you won’t get near as many benefits when compared to a credit monitoring service. Here are a few upsides to enrolling in professional credit monitoring.

1. It Can Aid You in the Credit Repair Process

Using a credit monitoring service can be extremely helpful during the credit repair process. While the credit furnishers and credit reporting bureaus are processing your dispute, you can prevent fraudulent activity. This is especially useful for victims of identity theft who need to continue using their credit cards and cannot afford a full credit freeze.

It enables you to monitor your credit throughout the credit repair process to know when your credit is good enough to make an investment decision. When making a big financial decision like buying a house or car, remember that a 1% change in the interest rate given to you by a financial institution can result in thousands of more dollars in total cost.

2. A Credit Monitoring Service Can Save You Time

Enrolling in a credit monitoring service is a useful time-saver.  Automated credit monitoring alerts free up your schedule by reviewing the activity on your credit accounts for you.  You can have peace of mind knowing that you no longer have to manually review all your accounts on a weekly, monthly, or even annual basis. The automatic alerts will notify you in real-time.

You can customize your alerts to be sent via text or automated voice call to your phone or to be sent to your e-mail inbox, or both, and you can choose which types of credit account activity will trigger alerts.

3. You Are Alerted of Any and All Purchases

Some credit consumers might want, or perhaps need, to have an alert for every purchase – perhaps on less commonly used credit cards.  Other credit consumers might want to set alerts for purchases outside of a specified geographic region. You can always edit your alerts later on.

While credit monitoring will not stop a cyber hacker from stealing your identity, it will mitigate the repercussions to your credit spending and credit trustworthiness. With credit monitoring, you can nip it in the bud immediately.  You can flag purchases that were not made by you before you pay for them with your own money.

4. Credit Monitoring Services Can Prevent Identity Theft

You can issue a credit freeze to stop fake accounts from being made in your name. In a credit freeze, you will also not be able to open new accounts or apply for loans, but neither can anyone else with your information. If you need to issue a credit freeze, know that it is free to do so.

Hopefully, simpler security changes will work to secure your credit.  These could include editing your accounts’ login information and setting up two-factor authentication.

5. Your Money is Less at Risk

The beauty of using credit monitoring along with credit cards is the assurance that your personal money will rarely if ever, be at risk. Your creditor will do everything in its power to investigate the fraudulent activities and recuperate its losses.

The same cannot be said if you unknowingly transfer money that pays for the part, or all of the fraudulent expenditures. Good luck getting your money back. The sooner you identify false expenditures and other suspicious activities, the more likely it is that none of your hard-earned income will be compromised.

FAST FACT : According to data provided by the Federal Trade Commission, the number of identity theft reports skyrocketed by 113% from 2019 to 2020. The amount of identity theft by credit cards increased by 44.6%.

Your Options for Credit Monitoring Services

You always have the option to self-monitor your accounts, but you may find it more rewarding to subscribe to one of the numerous credit monitoring tools available on the internet. Here’s a breakdown of some of your options.

Popular Free Credit Monitoring Services

Credit Karma is perhaps the most popular free credit monitoring tool. Another is Credit Sesame. Credit Karma and Credit Sesame offer free alerts tied to changes being made to your credit accounts. These alerts are sent in real-time, allowing you to quickly notice and stop fraudulent transactions.

Credit Karma pulls your credit reports from two of the three major reporting bureaus – TransUnion and Equifax – every week. It uses this information to update your account home page. Your home page will be unchanged when no new information has been added by the bureaus.

Besides displaying your scores for free, Credit Karma informs you of other resources available to positively influence your credit standing. These resources include:

  1. Quick tips to raise your credit score based on your history
  2. Collections on your credit reports that you might be able to have removed
  3. Credit financing and debt consolidation recommendations

Credit Sesame offers more or less the same credit monitoring services.

Credit Monitoring Services From the Bureaus

All three of the credit reporting bureaus – Experian, Equifax, and TransUnion, also offer credit monitoring services. Their different packages are as follows:

Experian
  • 1 bureau credit monitoring, meaning they only monitor your Experian Credit File
  • Price: Free for basic to $9.99 per month and up
Equifax
  • 1 bureau credit monitoring, meaning they only monitor your Equifax credit file
  • Price: $4.95 per month for the starter package
TransUnion
  • 1 bureau credit monitoring, meaning they only monitor your TransUnion credit file
  • Price: $24.95 per month

You will need to read the additional benefits included in each package to decide if a paid credit monitoring service through the bureaus is worth the cost. Hint: it is most likely not.

MyFICO Credit Monitoring

A more notable reason to pay for a credit monitoring service is to have access to your FICO credit score and be able to monitor your credit accounts from all three bureaus in one place.

Some Background Info on FICO

FICO is the abbreviated company name for Fair Isaac and Company, a data analytics and software company that originated in San Jose, California, in 1956. It is still based out of San Jose to this day. FICO has become the premier authority on measuring consumer creditworthiness in the United States.

FICO developed a patent-protected credit valuation formula that is regarded as the most accurate. Your FICO credit score is different from the scores recorded by Experian, Equifax, and TransUnion. The three credit bureaus cannot use FICO’s patented valuation calculator and created different valuation methods for their reports.

Unlike the credit scores available on Experian, Equifax, and TransUnion, your FICO score is not mandated to be available for free once every twelve months.

MyFico Credit Monitoring

Since a FICO credit score is held in the highest regard among potential creditors and other lenders, many consumers opt to pay for FICO’s credit monitoring service.

If you are interested in learning more, check out the myFICO credit monitoring service. It offers a single bureau credit monitoring service for $19.95 per month and a three-bureau credit monitoring service package for $39.95 per month.

Many believe this is the only credit monitoring service that has enough added value to rationalize paying for it.

The Difference Between Credit Monitoring and Identity Theft Protection

It’s a common mistake to confuse credit monitoring services with identity theft protection. They are both tools that you can use to protect your information and finances. However, they are not the same. Credit monitoring and identity theft protection are quite different from each other. Here are a few examples.

They Offer Separate Services

Credit monitoring is a service made for credit activity awareness.  Identity theft protection is a whole different service, with much more robust operations focused on action and correction. Some identity theft protection companies include credit monitoring within their service package.

They Contact Different Entities When Suspicious Activity is Reported

When you break it down, credit monitoring is a system of alerts sent to you and only you. Credit monitoring services do not directly contact your creditors, financial institutions, or credit reporting agencies. You have to contact the appropriate parties.

In contrast, identity theft protection sends alerts to you and sends alerts directly to your creditors, financial institutions, and credit reporting agencies. You have much less responsibility with identity theft protection plans, in exchange for a fee.

They Act and React Independently From Each Other

If your personally identifiable information has already been compromised, credit monitoring will do nothing to help you recover your identity.  Whereas identity theft protection will pursue your information, monitoring websites, databases, and servers for leaks.

The type of information identity theft protection screens for includes your Social Security number, driver’s license number, medical ID, credit card numbers, and bank account numbers. Some identity theft protection packages offer identity restoration services in their included list of services as well.

Check with a verified credit counseling agency, or credit professional in your area if you are unsure of which service to use. Credit monitoring should be more than good enough for many of your credit security needs.

Takeaway

Credit monitoring is a system of awareness related to credit activity and changes on credit accounts in your name.  Credit monitoring alerts are sent in real-time.  You may receive the alert in the form of a text message, phone call, or e-mail. There are plenty of free credit monitoring tools out there, although you may opt to pay for a service through one of the credit bureaus or myFICO.

Credit monitoring is not identity theft protection. Credit monitoring does not directly contact your creditors and financial institutions of suspicious activity. Nor does it help with identity recovery. You are responsible to take action when you receive a credit monitoring alert.

Still, real-time alerts of suspicious activity can be extremely helpful. You should be aware of and flag suspicious activity before transferring payment from your bank to your credit account. You do not want to lose money or be surprised when attempting to make an important life purchase.

For these reasons and more, credit monitoring is a powerful credit management tool to have in your arsenal.