What is Credit Monitoring? And Do You Need It?

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Updated: 28th Jan 2021
Written by Kim Pinnelli
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Credit
January 28, 2021
Written by Kim Pinnelli

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The influx of data breaches means credit monitoring is more important than ever. However, most people do not know what credit monitoring is, how it works, and whether it is a scam or not.

Today, I will review credit monitoring, its advantages and disadvantages below.

What is Credit Monitoring?

Credit monitoring, as the name suggests, is a service that monitors your credit report. If there’s a change in your credit history, it alerts you via email, text, or via phone. If you’ve been a victim of identity theft or worry about your information ending up on the dark web, it’s a helpful service.

Learn More: Best Credit Monitoring Services

How Does Credit Monitoring Work?

Each service differs, but most alert you of various changes to your credit report, usually within 24 hours of them occurring.

Ideally, credit monitoring services alert you of new accounts opened in your name or large purchases made on your accounts. Some offer more detailed notifications too, but it may get too tedious unless you’ve been a victim of identity theft.

What Does Credit Monitoring Do?

  • Takes Note of Hard Inquiries: Checks for new hard inquiries which means someone tried opening an account in your name. If it wasn’t you, the alert may help you prevent serious identity theft and fraudulent charges on your credit cards.
  • Identify Public Records: They may alert you of new public records, such as a bankruptcy or public lien on your account. If it’s something you didn’t do or aren’t aware of, it could be a sign that something is amiss.
  • New Accounts: Alert you of new accounts opened in your name, which could mean someone got a hold of your information. Hearing about the account before the thief has time to do anything with it is important.
  • Account Balances: Report drastic changes in your account balances. Excessive charges could be a sign that a thief is using your credit card or personal accounts.
  • Name Changes: Monitors for any name changes on your account, either adding a name or removing one.
  • Address Changes: Checks for any address changes, as thieves often change the address to prevent you from knowing about the account theft.
  • Track Identity Theft: Monitors for signs of identity theft and alerts you right away so you can prevent serious financial issues.
  • Dark Web Monitoring: Checks for your name or social security number on the dark web, which is a sign that your information is being sold.

What Credit Monitoring Can’t Do

  • Improve Your Credit Score: Credit monitoring alerts you of your credit report issues, but it doesn’t help your credit score.
  • Fraud Prevention: Credit monitoring tells you about your credit report’s suspicious activity, but it doesn’t stop it from happening.
  • Eliminate Data Breach Risks: There’s always a risk of a data breach anytime you share your personal financial information. Credit monitoring tells you when it happens, though, so you can act fast.
  • Prevent Phishing Emails: Phishing emails will still come, and credit monitoring won’t do anything about it UNLESS you fall for it and provide your information to the hackers behind the email.
  • Repair Your Credit: Credit monitoring prompts you to do something about the credit issue, but it doesn’t repair your credit – that’s your job.
  • Credit Freeze: You have to ask credit bureaus to freeze your credit, and it’s not related to credit monitoring. However, you may freeze your credit because of the information you get from credit monitoring.

Credit Monitoring Pros and Cons

Pros

  • You’ll know right away about any suspicious activity on your credit report and can act fast
  • You’ll know if your name or personal information hit the black market
  • They may help you handle identify theft
  • Some companies offer insurance against identity theft

Cons

  • It’s a pricey service
  • You’ll get a lot of information that’s sometimes overwhelming because you’ll hear about changes you make on your credit too
  • It doesn’t prevent identity theft because you discover it AFTER it happens

Should I Pay for Credit Monitoring?

Credit monitoring is pricey, but if you have a high risk of identity theft or if you have a lot to lose if someone steals your identity, it may be worth it if you can afford it.

It won’t prevent anything from happening but knowing right away that someone stole your identity can prevent things from getting worse.

Paid vs Free Credit Monitoring

We all think a paid service is better than free, but that’s not always the case.

If you’ve been involved in a major data breach, such as occurred with the Equifax breach, you may have access to free credit monitoring for a year. The free service usually monitors one credit bureau versus paid versions which usually monitor all three bureaus.

If you are strapped for cash, then check out Credit Sesame. They offer a free credit monitoring service that is loaded with exclusive benefits, robust security, and a beautiful mobile app that makes monitoring your credit painless.

Learn More: Credit Sesame Review

Avoid Credit Bureau Monitoring Products

Most credit bureau monitoring products have limited benefits and plenty of drawbacks. They cost as much as other services and yet don’t protect you nearly as well. They usually only monitor their bureau, and you sign an agreement that you won’t join a class-action lawsuit.

Is Credit Monitoring Safe?

Credit monitoring isn’t safe or unsafe. It’s an alert that tells you after you’ve been hacked or potentially hacked.

It’s a nice service because you can stop a thief in their tracks, but it won’t prevent anything from occurring. If you pay for monitoring from a legit service, it should be safe, but always do your research.

Bottom Line: What is Credit Monitoring?

If you’ve been a victim of identity theft, credit monitoring may give you some peace of mind. Nothing will help 100% though. It’s traumatic to have your identity stolen and exhausting to go through the steps to fix it.

If you don’t buy credit monitoring, diligently check your credit reports and dispute any information that isn’t yours to make sure you keep your credit as clean as possible.

More Credit Monitoring Resources:

Kim Pinnelli
Kim Pinnelli
Kim is a personal finance expert with a Bachelor’s degree in Finance from the University of Illinois at Chicago. She has been freelance writing for 13 years for a number of large publications. Kim thoroughly enjoys helping people take charge of their personal finances.