Don't Trust the Critics: Why Credit Monitoring Services are Worth it

If you've ever asked a "financial expert" whether you should invest in a credit monitoring service, chances are their answer came with an eye-roll and some less than positive comments. What was once thought of an unnecessary fee may be exactly what stops you from getting a good credit score, or even finding errors on your credit report.

It’s much easier to maintain a good credit score or build a good credit score from neutrality, than it is to improve upon a negative one. In order to truly monitor your credit score, you need to be able to keep up with any changes on your account for a number of reasons. The most important and popular reason behind credit monitoring or credit report monitoring, is to guard against fraud, crime and suspicious activity. Credit monitoring allows you to be quickly informed of any activity filed under your name, from credit card payments to unauthorized loans. Catching this activity early can help you to avoid the negative outcomes of identity theft and criminal fraud; which can take a long time to negotiate and have removed from your record.

Another popular reason to sign up with credit monitoring services is to better understand the effect that different activities have on your credit score and financial reputation. Do you truly know what effect that missed payment on your credit card is having, or defaulting on a loan repayment? Credit monitoring can be one of the most effective tools in building and maintaining a good credit score.

Free Credit Reports

All citizens of the United States are entitled to a free credit report from any of the three main credit bureaus (Equifax, Experian and TransUnion.) Many people who indulge in credit monitoring through free means opt to dip in and out of memberships with the three agencies and receive a free credit report from each of them every 4 months. This way, you can perform tri-annual checks on your account and hope to catch any unwarranted or unauthorized activity before it can have any detrimental impact on your financial reputation.

Paid Credit Monitoring

Many businesses and meticulous individuals are beginning to pay for a more comprehensive and on-demand alternative to the free credit reports. There are a number of agencies who now offer detailed and more accessible roads towards credit monitoring, with real time analysis and reporting available through websites and software for the consumer. Typically, these credit monitoring services will report back on all major levels of activity such as changes in employments, new loans/credit taken out in the account name, ‘black marks’, public record updates, delinquencies and liens, credit inquiries and more. The advantage that the paid services have over the free ones is mainly the connection to the consumer, who can sign up for alerts when changes to their account are made; rather than having to wait for up to a year between reports.

Pros and Cons of Credit Monitoring

The advantages of credit monitoring are well documented, with early alerts and on-demand access to your account information; but the drawbacks are not as well known. The main negative outcome of credit monitoring is the common assumption that it protects the consumer from identity theft, but credit monitoring is designed to report changes to the account; not breaches of security. Another often cited drawback is that some agencies offering this service will provide data from only one of the three major bureaus, so always make sure that you find a service which reports from all three and always research the trust of companies you provide personal details to.

Top 5 Credit Report Companies