Credit Monitoring Tools

Some companies have tapped into people's fears of becoming victims of identity theft, where their personal information is used to commit fraud. Those companies advertise products they say will help scrutinize consumers' financial information to prevent identity theft. However, questions have been raised about the effectiveness of such credit monitoring tools.

Consumer Protection

Credit monitoring services have raised many debates in the financial industry. For instance, a Smart Money article titled "Credit Monitoring: A False Sense of Security" asserts that many credit-monitoring products can't protect consumers from identity theft. That's because some monitoring products provide credit reports from only one of the three nationwide credit bureaus. Therefore, if suspicious activity that would alert a consumer to identity theft appears on one or both of the reports not consulted, a consumer won't know it immediately. An identity thief could do a lot of damage to a consumer's finances before the theft is discovered.

Do-It-Yourself Monitoring

The U.S. Federal Trade Commission recommends that consumers check their credit reports to ensure they're accurate and complete. That includes ensuring that all accounts listed in your credit reports were opened with your consent. The U.S. Fair Credit Reporting Act requires each of the nationwide consumer-reporting companies to provide consumers with one free credit report annually upon request. You also can monitor your credit accounts by reviewing monthly statements from your credit card companies. Look over all charges on the statements to ensure you authorized them.

Potential Benefits

People who know they're unlikely or unwilling to consistently monitor their credit files to check their accuracy and possibly detect identity theft may benefit from using a credit monitoring service. Having some sort of credit-monitoring system in place may be better than nothing, especially if you're likely to let your credit files go unchecked for several years at a time. A credit-monitoring service that manages to reveal errors or fraudulent activity connected to your credit files may be worth the cost.

Considerations

A Fox Business article titled "Credit Monitoring Services: How to Protect Yourself" cites a study that indicates consumers' use of credit monitoring services has fallen 42 percent since 2008. The drop in demand could be linked to the cost of the services, which can be as high as $200 per year. Furthermore, the article notes that the Identity Theft Resource Center indicates the amount of consumer records that have fallen prey to identity theft has dropped 90 percent since 2009.