Are Credit Monitoring Services Worth it?

Being a victim of credit fraud or identity theft may motivate you to take action to ensure it doesn't happen again. If you haven't experienced it already, you may be someone who worries about having your personal information stolen. To alleviate the public's concern, there are credit-monitoring services to help you track the activity on your credit report for a fee. Whether it is worth it will depend on your individual situation.

Purpose

Thieves may steal your identity by finding details about you in your trash, by stealing your wallet, using Internet scams or by taking information from your credit card. Once they have your name, Social Security number (SSN), birth date or bank account number, they can establish credit in your name, spend the money and stick you with the bill, or they can wipe out your bank account. For a fee, credit-monitoring services check your credit history with the major credit reporting bureaus for any suspicious activity and alert you to possible fraud.

Advantages

For an average of $14.95 per month as of 2010, credit-monitoring companies will frequently track your credit reports to determine if someone has opened new accounts using your name and personal information. They tell you when someone has applied for new credit or if your current balances have increased rapidly. You also may be able to purchase insurance against expenses caused by identity theft. In addition, WalletPop.com claims that hiring a credit monitoring service will allow you to review your credit history frequently and may even cause you to change poor spending habits.

Disadvantages

Credit monitoring services cannot prevent identity theft. They will alert you when there is activity on your account, even if you are the one creating it. Also, if someone uses your SSN to open a new credit account or take out a loan, the creditor may not report it to the credit bureaus right away. This would delay a notification to you of suspected fraud. In addition, if someone steals your identity, some credit monitoring insurance plans have loopholes that will not cover you in a loss.

Alternatives

You may order a free credit report every year from each of the major reporting agencies: Experian, TransUnion and Equifax (see Resources). If you order a report from one agency every four months, you can check for any unusual activity throughout the year. If you fear someone has compromised your personal information, you can place a security freeze on your account with each bureau. According to the Experian website, this will not allow any organization to check your credit, something required for credit card or loan approval. If you would like to open new credit, you may temporarily remove the security freeze from your file, making your credit history available to those you authorize to check it.