Should I Get Credit Monitoring? It’s All in How You Use It

The information and activity on your credit report has an effect on your credit score. The factors that affect your score include whether your bills are paid on time, the limits on your available credit, the type of your available accounts, and the length of time each account has been open. Other factors influencing your score include the number of recent credit reports you’ve requested, the number of new accounts you’ve applied for recently, and the amount and status of outstanding debt; all of these can have an effect on your credit score. Therefore, it is very important and beneficial for this information to be accurate. Your credit score can be used by financial institutions to make decisions about lending, employers could consider it for hiring decisions, and insurance companies can use it for offering coverage. The Federal Trade Commission offers consumers many resources and educational materials about credit and credit reporting. Since your credit is so influential, identity theft can be very damaging. If an identity thief accesses and misuses your personal information, he or she could make withdrawals or transfers from your bank account, open new accounts or perform transactions on your credit accounts. The aggravation and time spent recovering from identity theft is a strong motivator to prevent it as much as possible.

What Is Credit Monitoring?

Credit monitoring services are available through a number of companies. They help monitor your accounts, credit reports and personal information. They can place fraud alerts or freezes on your credit, as well as renew or update alerts and freezes on your behalf. Also, notifications or emails about activity, credit inquiries, or new accounts can be sent through the monitoring service such as Credit Sesame. These notifications alert you to changes or activities that were not performed by you or that need to be disputed.

What Credit Monitoring Is Not: Credit Monitoring vs. Identity Theft Protection

Although credit monitoring is helpful to reduce damages, it doesn’t prevent identity theft. Protecting your personal information—whether it is online or offline, in physical documents or given over the telephone—is the best way to reduce your risk of identity theft. Stop it before it starts. Credit monitoring services make it possible for you to be informed as soon as a theft is detected. This early warning will allow you to take immediate action to reduce the damage that can be caused by identity theft. The key to reducing the damage of identity theft is to take action as soon as possible. Sometimes your liability is based on how quickly you respond to the fraud, loss or theft. Some consumers assume that credit monitoring will prevent identity theft, not taking advantage of the benefits and therefore not getting enough out of their investment, according to Business Insider.

There are steps that can be taken by victims of identity theft to help reduce the damage. They can place freezes or alerts for free and are not liable for fraudulent transactions. When you are suspicious that identity theft or misuse of your information has occurred you can request that a fraud alert be placed on your credit report by a credit reporting company. This alert lasts 90 days and can be renewed, and businesses are required to verify identity before issuing credit in your name. Also, identity verification by a company is needed for them to have access to your credit report. One credit reporting company will update the other two, so you only need to contact one of them. You can obtain a free credit report from Equifax, Experian and TransUnion. When identity theft has occurred and after completing an Identity Theft Report, you can request an extended fraud alert. This is placed on your credit report, lasts for seven years, and businesses are required to verify identity before issuing credit or accessing your credit report. Also, your name is removed from prescreened credit offer marketing lists for five years or until you request to be re-added. You can request two free credit reports within 12 months from the three credit reporting companies. Consumers can also request a credit freeze when concerned about misuse of their information. A credit freeze prevents all access to your credit file, though you can still obtain a free credit report annually. This freeze must be lifted before any company can review your credit; the cost and length of placing or lifting a freeze vary by state, and lifting a freeze can be temporary or permanent.

Benefits of Credit Monitoring Services

Even though credit monitoring services will not prevent identity theft from occurring, Daily Finance gives a lot of examples about how it is a worthwhile service. Credit monitoring allows you to see the impact on your score for every action that is taken, instead of seeing an overall cumulative impact after several months, like what you get from one credit report annually. This education about credit can be used to influence the necessary steps needed to enhance your score. A better credit score can have lasting benefits. These benefits can include being able to get lower payments, having access to better financial opportunities to manage debt and budget, influencing employers making hiring decisions, and avoiding higher interest payments. When leading up to a major financial event like a mortgage or refinancing, being informed often can be extremely helpful.

Credit monitoring services will not prevent identity theft or the misuse of your personal information. However, such services can be very helpful in alerting you to identity theft so you can take action as quickly as possible to reduce the potential damage. Also, credit monitoring services can be used to successfully increase your knowledge about how the credit reporting system works so that you can use that information to affect your credit decisions and actions, and improve your credit score.