Why You Might — Or Might Not — Want to Invest in a Credit-Monitoring Service

Jan 31, 2019

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Worried that a hacker might steal your personal information and open new credit card accounts in your name? Or maybe you fear that a cyber criminal will use this information to apply for personal loans. Can a credit-monitoring service protect you?

Maybe, but credit-monitoring services are only warning systems. They won’t stop hackers from stealing your information. They will alert you when these criminals open new accounts in your name or your credit score changes.

You’ll have to determine if paying for these alerts is a smart financial move or if you want to rely on both credit monitoring and a credit freeze to add extra protection.

How Credit-Monitoring Services Work

Those unused credit cards in your wallet are still useful! (Photo by mixetto/Getty Images)
Make sure all the card accounts reflected on your credit report were actually opened by you. Photo by mixetto/Getty Images.

A credit-monitoring service will alert you when a credit application has been made in your name. If someone applies for a new credit card in your name, your credit-monitoring service will send you an alert. If someone tries to take out a loan using your information, you’ll again receive an alert.

You’ll also receive an alert if your credit score changes. That’s important, too: Your score could take a big drop if hackers open a new credit card account in your name and then fail to make payments on this account. Those missed payments can send your score plummeting. A score that falls unexpectedly, then, can be another warning that a hacker has stolen your personal information.

You can order credit-monitoring services from the three national credit bureaus of Experian, Equifax and TransUnion. These services aren’t free, though, and can add up to a significant amount of money depending on how long you use them.

You can also get credit monitoring from outside companies such as Credit Karma. This service is free. It’s important to note, though, that Credit Karma only monitors your credit reports with Equifax and TransUnion, not with Experian. The credit-monitoring service provided by Credit Sesame is free, too, but it only looks at your TransUnion report, excluding your reports from Equifax and Experian.

To gain the most protection from credit monitoring, then, you’ll have to pay for the services offered by the national credit bureaus.

Equifax’s ID Patrol will cost you $16.95 a month, while Experian’s CreditWorks Premium costs $4.99 the first month and $24.99 each additional month. TransUnion’s credit-monitoring service costs $19.95 a month. The bureaus will charge these fees every month unless you cancel the service.

Are these fees worth it? It depends on how worried you are about identity theft and how willing you are to monitor your credit on your own.

They Won’t Prevent All the Pain

Marshall Armond, chief executive officer of credit repair comparison site CreditRevo, said that the main benefit of credit monitoring is that it provides real-time insight in your credit activity. If a loan request pops up in your name, your credit-monitoring service should alert you.

This helps you spot potential fraud sooner, Armond said. But credit monitoring is not a cure-all for all types of fraud or identity theft, he said.

“What these services won’t protect you from is your Social Security Number being sold and used to open new accounts in your name,” Armond said. “You would be alerted when it happens, but none of these services would help stop it from occurring.”

Finding the right credit-monitoring service does require some research. Armond said that most providers offer the same basic service. But there are certain questions you should ask. The most important? Does the service monitor all three of your credit reports, one each maintained by Experian, Equifax and TransUnion? If it doesn’t, then the service isn’t worth your money. Fortunately, the monitoring services from each of the three credit bureaus do monitor all three of your reports.

Armond recommends that consumers study the cancellation policies of these services carefully, too. Many charge a monthly fee that they’ll continue to assess until you cancel the service. You might no longer want the service but might also forget to cancel it. If you don’t notice the monthly charge, you could end up paying a lot of money for a service you no longer want.

You Can Do it on Your Own — For Free

Image by i_frontier / Getty Images
You’re entitled to one free credit report from each of the three national credit bureaus each year. Image by i_frontier / Getty Images

Credit-monitoring services, of course, are not the only way to watch for credit fraud. Nate Masterson, chief financial officer of Maple Holistics, said that you can monitor your credit on your own without paying any fees.

To do this, you can order your free credit reports from AnnualCreditReport.com. You are entitled to one free credit report from each of the three national credit bureaus, TransUnion, Experian and Equifax, once a year. You can order one credit report at the beginning of the year, another in the middle and a third at the end.

Once you get these reports, you can study them for any unusual activity. If you find a credit card account opened in your name that you don’t remember applying for or a loan listed on your report that you never took out, contact the credit bureau immediately and report the fraud.

This isn’t a foolproof way to monitor your credit, of course. You might miss something reading your credit reports on your own. Fraudulent activity could take place after you order one report and before you order the next. But this will save you money on credit-monitoring services.

The key is to determine whether you are comfortable enough reading your credit reports on your own or if you’d prefer the protection provided by a professional service.

“Is it worth the peace of mind? That’s up to you,” Masterson said. “If you think you’re too busy to keep an eye on your own credit, then signing up for credit monitoring might be a good alternative.”

Credit Freezes Matter, Too

Royalty-Free Stock Photography by Rubberball.com
Credit freezes are another option for protecting yourself from fraud. Royalty-Free Stock Photography by Rubberball.com

Another way to protect yourself from identity theft, and to do it for free, is to freeze your credit.

When you do this, lenders and creditors can’t access your credit reports. This means that these same financial institutions can’t open new loans or credit cards in your name. It’s a way, then, for people to prevent hackers from using their information to open new accounts.

In good news, freezing your credit is free. You can also do it through the credit-monitoring services offered by the three credit bureaus by logging onto your account and requesting a freeze.

You must, though, order freezes with all three credit bureaus, Equifax, Experian and TransUnion, separately. If you order a freeze through your Experian credit-monitoring service, you won’t freeze your TransUnion or Equifax report. And if you do want to apply for a new credit card or take out a loan, you’ll have to unfreeze your credit with the same bureaus. You can then refreeze your credit once your loan or credit card application is approved. Fortunately, unfreezing your credit is free, too.

But like credit monitoring, freezing your credit isn’t a foolproof way to stop identity thieves. Yes, a freeze will stop hackers from opening new accounts in your name. They won’t, though, stop them from hacking into your current credit accounts and making fraudulent purchases in your name or breaking into your bank accounts and draining your funds.

To watch for that type of fraud, you’ll have to keep a close eye on your bank account statements and credit card bills.

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