A healthy concern over the threat of identity theft is a perfectly rational attitude in today’s information-driven, Internet-based world. All types of information, including your personal information, is online, and much of it is accessed on a regular basis.
In most cases, it’s you or the financial institutions you’re dealing with who are tapping that information. But every now and again an unauthorized third party enters the picture. That’s when one or more of your financial accounts can be compromised. And under extreme circumstances, another party may assume your identity and use it to apply for new credit in your name, or even empty your financial accounts.
The only real protection from that kind of outcome is to be aware of it as soon as possible. That’s where credit monitoring comes in, and why you may want to consider taking advantage of it.
What is Credit Monitoring?
There are different variations of credit monitoring.
👉 At a minimum, a credit monitoring service will monitor your actual credit activity. The basic service focuses on tracking your credit reports to identify suspicious activity or significant changes in your information. The purpose is to give you an early warning of identity theft that will allow you to take prompt action to minimize the damage.
👉 More sophisticated services go into greater detail. This can include alerting you of large-scale data breaches, searching public records, monitoring your bank accounts, alerting you of changes in your address filed with the United States post office, and monitoring social media and the Dark Web for any attempt to sell your personal information.
Credit monitoring services come in a variety of packages, and you can choose the level of protection you want. Obviously, the more comprehensive the protection, the higher the cost of the service.
Do You Need Credit Monitoring?
The answer to this question will depend on your evaluation of the likelihood of your identity being stolen.
The more financial accounts you have, and the more active you are within them, the greater the likelihood will be of your identity being compromised.
If you have only a few financial accounts and your exposure is relatively low, you may not feel any pressing need to monitor your credit on a regular basis.
⚠️ Identity theft can be a problem even if you’re only a light user of financial accounts. An identity thief isn’t always looking to take over a bank account or credit card. For many, the bigger prize is your very identity.
If the thief can get your name and address, along with your Social Security number or a valid account number, it may be possible to access other information. With your complete profile, the thief can pose as you and apply for credit, bogus tax refunds, apartment leases, and even medical benefits in your name.
The thief will get the benefit of all those activities, but you’ll be held responsible for the cost.
3 Ways to Monitor Your Credit
There are three levels of credit monitoring:
- free credit monitoring services,
- paid credit monitoring services.
Which you choose will depend on your evaluation of your personal risk.
Let’s consider each of the three ways to monitor your credit.
⚠️ Be warned in advance that no credit monitoring system is completely foolproof. No matter how thorough the service, there’s always the potential for theft to go unnoticed, or for a thief to slip in under the wire. That’s why the single biggest benefit of credit monitoring is the ability to alert you of theft as early in the process as possible.
Do It Yourself
If you don’t feel the need to sign up for a credit monitoring service, you can choose to do it on your own. Just be aware that the DIY route won’t provide anything close to comprehensive monitoring.
You can start by setting up alerts from each financial account you have. That will include bank accounts, brokerage accounts, retirement accounts, credit cards, and any loan accounts you have.
Alerts can be set up to let you know when your account has been accessed, giving you an opportunity to head off any unauthorized activity.
But setting up alerts with existing financial services won’t prevent a thief from applying for credit in your name. That will require regular monitoring of your credit reports.
You can do this by getting copies of your credit reports. Under federal law, you’re entitled to one free copy of your credit report each year. Since there are three credit bureaus – Experian, Equifax and TransUnion – you’ll be entitled to three free reports.
☝️ You don’t need to request the reports from each bureau. Instead, you can sign up for access to all three at Annual Credit Reports.com. That’s the only source authorized to provide your official credit report from each of the three major credit bureaus. For more information, read our guide on how to get your free credit report.
You can stagger receipt of the three reports. For example, you can access one credit report in January, a second in May, and a third in September. That will at least enable you to review your full credit report every four months. When you do, be on alert for any unauthorized activity or suspicious entries.
If you don’t have much experience with credit reports they may initially seem confusing. Start with our guide to understanding your credit report.
Free Credit Monitoring Services
If you want a more formal credit monitoring system but aren’t ready to pay for it, there are plenty of free credit monitoring services. Two of the most popular are Credit Karma and Credit Sesame.
You can also sign up for free credit monitoring services through current financial accounts. For example, many banks, credit unions and credit card issuers offer free credit monitoring as a service to their customers.
Free credit monitoring services won’t give you regular access to your credit reports. They will provide your credit score, including the details that make it up. Since your score is typically updated each month, you’ll need to monitor it for any significant changes.
☝️ A 10- or 20-point change in your score is normal. But if you see a 50-point drop and you don’t know why it happened, you’ll need to look closely at the reasons why your score fell.
If there’s any suspicious activity or information, you’ll need to investigate further.
If your personal information has been compromised by a data breach at a company you do business with, the company may offer you free credit monitoring services for a year or more. It’s something of a peace offering to help you minimize the damage from the data breach.
In many cases, the company experiencing the breach will offer credit monitoring to all affected individuals. If they don’t, you should ask the company to provide it. After all, your identity and information have been compromised, and you’re entitled to an opportunity to protect yourself.
Paid Credit Monitoring Services
Paid credit monitoring services give you much more comprehensive monitoring. The service will be regularly tracking activity on your credit report and alerting you of any unusual developments. It’s a more thorough way of staying on top of your credit.
The main problem that consumers have with paid credit monitoring services is cost. Paid services will typically require payments on a monthly or annual basis. And as is typical with these services, you’ll generally be required to put a credit card on file with the monitoring service, so that they can bill you automatically. If you forget about the service, which is easy to do if nothing happens, the billing carries on.
There are literally dozens of paid credit monitoring services available. But if you’re searching for the best service to use, you should take a close look at those offered by the three major credit bureaus. Experian, Equifax, and TransUnion each offer their own credit monitoring services.
Whatever services you’re considering, carefully evaluate the benefits each provides. There are big differences between services.
For example, some will provide monitoring of only a single credit bureau, while others will monitor two or three. Some will even offer identity theft restoration services, as well as insurance to cover the cost of financial losses and legal bills.
For most people, a paid credit monitoring service could be considered overkill. If you are at high risk of identity theft – for example, if you do a lot of business online, if you believe your personal information may have been compromised, or if you have already detected evidence of identity theft – it could still be a worthwhile investment.
If you’re like most people, you have probably considered some level of credit monitoring. Most of us are aware of identity theft, and most of us want to avoid it. But before choosing a credit monitoring option, you’ll need to assess your risk level.
Do-it-yourself credit monitoring may be all you need. But if you have multiple financial accounts that you use on a regular basis, or if you often conduct business online, you’ll need to consider a more comprehensive level of monitoring. Fortunately, there are plenty of options to fit your budget and your personal preferences.
👉 One last – and very important – piece of advice: the time to protect yourself from identity theft is before it happens. Once it does, it will already be too late.