What Is Credit Monitoring?

Highlights:

• Credit monitoring services track changes to your credit reports and alert you about the changes.
• A good credit monitoring service can help you know when fraudulent activity occurs so you can address it.
• Monitoring your credit reports gives you insight into how the information affects your credit scores.
• You can choose from a variety of credit monitoring solutions.

Credit monitoring is a service that can help you keep an eye on the activity on your credit reports from one or more of the three nationwide credit reporting agencies (NCRAs)—Equifax^®, Experian^® and TransUnion^®. Credit monitoring can help you better protect yourself against identity theft.

Understanding credit monitoring

Technically, credit monitoring is something you can do yourself. In fact, it's possible to order free credit reports from any of the three nationwide credit reporting agencies. You can then review those credit reports for any suspicious activity.

Of course, that would take a lot of time and effort on your part, and credit monitoring services exist to make the process more efficient. Credit monitoring services keep an eye on key changes to your credit report, and you can set it up so you receive email or text notifications whenever a key change occurs. You may get faster results without putting in the time yourself.

When you're in the know about changes to your report, you also know when changes occur that aren't related to your own financial activity. Those are worth looking into because they could indicate fraudulent activity.

Benefits of credit monitoring

Some reasons to begin monitoring credit include:

• Early detection of suspicious activity. Credit monitoring services check for changes to your credit reports, including hard inquiries. Hard inquiries show up on your credit reports when lenders or creditors review your credit report because you have applied for a loan, credit or service, such as a credit card, mortgage or auto loan. If you get a notification about new hard inquiries and you haven't applied for any credit recently, it's an early sign that someone is using your personal information to try to get credit.
• Understanding how your credit report changes. When you monitor your credit, you become more familiar with how your credit report can change over time.

Choosing the right credit monitoring service

Choosing a credit monitoring service that works for you can help ensure you're satisfied with your investment. Some things to consider when comparing credit monitoring services include:

• Cost. While you can get some basic credit monitoring services for free, you typically need to pay for more functionality. Consider how much a service costs and what you get at various paid subscription tiers. Many credit monitoring services offer free trials, and this may be a good way to test out a service before paying for it.
• Level of control offered. Look at how much control you have over the service. Can you customize alerts and notifications?
• Which reporting agencies are monitored. The information in each of your credit reports can be unique and not all lenders report to all three NCRAs. Choosing a service that monitors your credit report from all three NCRAs may provide you with more information.
• Access to information and control. Consider how you interact with the service and whether those methods work for you. Some options are app-based, which means you primarily interact with them via an app on your smartphone. Others may be web-based, making it easy to use the service on your computer or your mobile device.

How credit monitoring works

When using a credit monitoring service, it helps to understand how credit monitoring works. Here's a step-by-step look at the basic concept behind credit monitoring.

1. You sign up for the credit monitoring service.
2. The service begins to monitor one or more of your credit reports. If someone steals your personal information and uses it to apply for a credit card, and they are approved, the credit monitoring service notices a change on your credit report. Perhaps it's that there was a hard inquiry when the company checked your credit related to the fraudulent credit application. It could also be that a new account was opened in your name. Remember, not all lenders and creditors report to all three NCRAs. Some may report to only two, one or none at all. As a result, you may not always get an alert from each NCRA.
3. You receive an email or text, depending on the types of notifications you set up. The notification alerts you to the new activity on your credit report.
4. You realize someone has used your name to try to open an account. You can contact the lender to let them know it's fraudulent and freeze your credit report to help protect against the identity thief from doing this again.

Credit monitoring and identity theft

A credit monitoring service does have limits in protecting you from identity theft. In general, these are defensive measures. Monitoring your credit reports only lets you know when fraud might be occurring—it doesn't, on its own, generally stop the fraud from occurring. It's a good idea to combine credit monitoring with other protective measures, such as security freezes and fraud alerts, to help best protect yourself.