What is credit monitoring?

When you build and maintain your credit, you naturally want to protect your finances and watch for changes to your credit reports. This is where credit monitoring comes in. The credit monitoring process is precisely what it sounds like — you monitor or watch your credit reports for changes.

According to the latest Consumer Sentinel from the Federal Trade Commission (FTC), about one in five Americans have lost money to identity theft, imposter scams and credit bureau fraud. It’s more important than ever to know your options when it comes to protecting your finances.

What is credit monitoring?

Credit monitoring is a systematic and continuous review of your credit report. It helps you identify changes, updates and irregularities. Credit monitoring offers a proactive way to keep track of your finances and get notified when inaccuracies, potential unauthorized activity or signs of identity theft appear on your report(s).

Monitoring your credit does not negatively impact your credit score. Indirectly, it can positively impact your credit by informing your financial decisions. Ultimately, credit monitoring enables you to understand your creditworthiness and take prompt action to address any issues that might arise. However, credit monitoring alone won’t protect you from identity theft.

Credit monitoring does not:

• Alert you to unauthorized bank withdrawals
• Block credit card skimming
• Correct credit report errors
• File fraud reports
• Initiate credit freezes
• Notify you of fraudulent tax returns or refund collection
• Prevent phishing attempts
• Prevent unauthorized credit applications or new account openings
• Secure your information

Still, without credit monitoring, you may not be able to take these actions or even know that you should.

According to the Consumer Financial Protection Bureau, “Checking your own credit report is not an inquiry about new credit, so it has no effect on your score.” Nonetheless, by routinely checking your credit report, you can make certain that the data credit reporting agencies provide to lenders is both precise and current.

Credit monitoring terms to know

Before you decide on your credit monitoring strategy, get to know some key terms:

• A credit monitoring service is a tool, app or website that constantly monitors your credit report and automatically alerts you to any changes or activity that could affect your credit score.
• Free credit monitoring refers to methods or services that enable credit monitoring at no cost.
• Paid credit monitoring is a credit monitoring method or service that charges a subscription fee.
• Tri-bureau credit monitoring looks at credit reports from all three credit bureaus.
• Single-bureau credit monitoring looks at a single credit report from one credit bureau, either Experian, Transunion or Equifax.
• A credit monitoring alert is a notification that informs you of any changes or suspicious activity detected in your credit report.

Who can monitor your credit?

Certain entities, including lenders, landlords, employers, insurance companies, government agencies and utility providers, are authorized by law to access your credit report. However, this access is tightly regulated under the Fair Credit Reporting Act (FCRA). If your report is accessed without a valid reason, both the entity requesting access and the credit reporting bureau can be held liable under FCRA guidelines.

Employers cannot access your credit report without your written consent. Generally, lenders and credit monitoring service providers need your written consent to access your credit report. The same goes for your spouse or children — even loved ones need a valid reason and written consent to access your credit report.

However, there are infrequent exceptions to the need for written consent. For example, next of kin may need to access a credit report and consider a credit freeze upon a loved one’s death. Overall, the law is meant to ensure that your credit information is accessed only for legitimate purposes and protects your privacy rights.

Benefits of using a credit monitoring service

When you monitor your credit, you can continually review all facets of your credit report, depending on the approach you take. The simplest way is through a credit monitoring service that automates most of the work.

Credit monitoring services vary and offer a range of features, including:

• Access to credit reports and scores
• Address change discovery
• Dark web monitoring
• Hard inquiry monitoring and alerts
• New account detection
• Potential fraud alerts
• Public records watch

These features help you stay proactive and keep you informed about any changes or threats to your credit profile in real-time.

Credit monitoring prices and features can vary significantly. Some credit monitoring services are free, and some cost more than $15 per month.

Standalone credit monitoring services might offer discounts for other products and services to boost your credit, protect your identity and improve your financial health. Likewise, credit monitoring can be an add-on service with a bank account, credit card, identity theft insurance or other financial product.

What is the best credit monitoring service?

The best credit monitoring service for you will depend on your goals, needs and your budget.

As you decide which credit monitoring service is best, consider factors like:

• Cost and affordability
• Credit bureaus monitored and credit scoring models used
• Features offered, such as real-time alerts and identity theft protection
• Reputation and customer reviews

Before committing to a service, ensure you fully understand the terms and offerings, especially with “free” credit monitoring.

Before accepting a free offer, scrutinize it for hidden fees or cancellation prerequisites. And, consult your local consumer protection agency and State Attorney General office to review any complaints filed against the company.

Other ways to monitor and protect your credit

In place of or along with credit monitoring services, you can request free credit reports from each bureau through AnnualCreditReport.com. From this source, free reports used to be accessible once per year. Now, you can access their reports up to once per week at no cost.

The most accurate information about your credit reports will come directly from the credit bureaus — and this is where lenders are most likely to get their information when they make financial determinations. However, you may need to pay a fee to see your FICO credit score when you request it from Transunion and Equifax.

Today, most banks and credit unions offer credit insights, whether it be a quick view of your credit score or full access to credit reports. You can take advantage of these services without any negative impact on your credit score. Note, however, that the information may not be updated in real time.

To defend your credit, you might also want to:

• Consider a credit freeze when heightened personal information security is a concern.
• Establish alerts on your credit cards to receive notifications for any charges made.
• Explore budgeting apps that offer complimentary credit score tracking services.
• Regularly review your online credit card statements, aiming for at least monthly checks.
• Review the activity in your bank and other financial accounts at least once per week.
• Use a credit repair company to help correct errors on your report.
• Use robust passwords and make sure they differ across your accounts.

If someone opens a credit account in your name, report the incident immediately and take any necessary steps to prevent it from happening again.

Next steps

Now, take action to protect your financial well-being:

1. Consider whether paid credit monitoring, a free solution or alternative methods align with your needs, budget and preferences. Many people choose a combination of credit monitoring tactics.
2. If you’re leaning toward credit monitoring services, research providers based on factors like reputation, features, cost and the credit bureaus they track.
3. Regardless of the monitoring option you choose, take proactive measures to safeguard your credit and financial health. You might want to set up alerts for suspicious activity or research identity theft protection options.
4. Stay up to date on changes in the credit monitoring landscape, new features offered by providers and any developments in fraud prevention techniques.

By following these steps, you’ll keep an eye on your credit, safeguard yourself against identity theft and continue to make informed financial decisions.