If you want to keep tabs on your credit report to catch errors, improve your score or keep an eye out for fraud, you might be tempted to sign up for a credit monitoring service.
Personal finance experts are divided about whether these services are worth the cost, but many say signing up can help some consumers. But it's important to be able to distinguish exactly what these services offer, how much they cost and what you can expect in return for your payment.
Here are some tips to help you navigate the pros and cons of credit monitoring services:
Credit monitoring 101Basic credit monitoring services usually track your credit reports at one, two or all three of the major credit bureaus -- Experian,Equifax and TransUnion -- and send you an e-mail, text message or letter,depending on your preference, if there's an inquiry or other activity. Many also offer unlimited access to your credit report from at least one of the bureaus, tracking of your credit score, telephone help with fraud resolutionand even reimbursement of some out-of-pocket expenses incurred while trying toresolve identity theft or other fraud.
"Credit monitoring services can be helpful for spotting certain problems, such as if somebody opens a new credit account in your name using your stolen information," says Susan Grant, director of consumer protection for the Consumer Federation of America. "But they don't necessarily alert you to every type of identity theft you could encounter. For example, ifsomebody is using your stolen personal information to get a job or a cell phone, something that wouldn't necessarily be reported to a credit reporting agency, then credit monitoring isn't going to pick that up."
Here is a sampler of the offerings of six credit monitoring services, comparing their features and costs (story continues below).
For that reason, more providers have begun offering broader identity monitoring services that typically include credit monitoring along with other features -- such as monitoring of public records, databases and websites for use of your personal information.
According to Tom Harkins, chief strategy officer for Secure Identity Systems, which offers both types of services, total identity monitoring might check real estate transactions, court records, telephone accounts and even hunting or fishing licenses to look for fraudulent use of the consumer's name, Social Security number or other personal data. Harkins says:"Total identity monitoring goes wider and deeper to protect the consumer."
Does credit monitoring pay off?Consumer advocates don't all agree on whether credit monitoring, which typically costs $10 to $15 or more per month -- a total of$120 to $180 a year -- is worth the money. Some say it's an extra layer of protection that's smart to have, while others say it's unnecessary.
Consumers can monitor their own accounts to catch errors or look for fraud and also can take other free or low-cost steps to protect themselves, but credit monitoring might make sense for someone who has been the victim of identity theft or fears their personal information has been compromised, says Suzanne Martindale, an attorney and associate policy analyst for Consumers Union.
"Monitoring seems more appropriate for someone who has reason to suspect their credit information has been at risk or has been exposed;for example, if you got a notice there was a data breach and your Social Security number might be flying around," Martindale says.
Do-it-yourself alternativeInstead of shelling out cash for credit monitoring, she says, consumers could simply get their free annual credit reports from the three major bureaus at AnnualCreditReport.com, and closely watch activity on their bank and credit card accounts. A consumer who wants further protection,she says, could place a 90-day fraud alert on his credit files or even pay a one-time fee to enact a credit freeze -- which prevents creditors from accessing the credit reports until the consumer lifts the freeze.
Says Martindale: "If you pay $10 to place the freeze, then another $10 to temporarily lift it when you want to buy a new car or something,at least you're not paying a fee every month, which can really rack up overtime."
In addition to cost, another possible issue with credit monitoring services is the existence of so-called fragmented files, experts say. According to Secure Identity Systems' Harkins, criminals commonly try to evade detection by using only a part of someone's identity to sign up for an account or obtain credit -- and that could create a whole new file that probably would not show up right away in the victim's main credit file -- and so would not trigger an alert. "As a consumer, you hope when you're getting your credit information you're getting the full picture, but that's not always the case," hesays.
Some experts swear by credit monitoring services, however.The executive director of the Identity Theft Council, Neal O'Farrell, says he started using a credit monitoring service about six years ago, and his organization partners with a provider that offers these services. "I recently was at Best Buy and applied for a store credit card because they had an in-store promotion," O'Farrell says. "When I got home, I already had an alert notifying me there was a credit inquiry. It's comforting."
Shopping for a credit monitoring serviceCredit monitoring services typically are offered through banks or credit unions, by credit bureaus or directly from companies that provide the services. Experts recommend to thoroughly check out the provider before signing up for any credit monitoring service and offer the following tips for finding a reputable service provider.
- Check to see if the company checks your credit reports from all three credit bureaus. Some only allow you access to just one, and many times information that is included on one credit report does not appear on the other.
- Look at how long the company has been in business and what kind of security expertise it has -- and be wary of companies that say very little about its background on its website, O'Farrell says. "Do your homework on the company. It's an unusual industry, and there are a lot of shady characters and opportunists."
- Steer clear of companies that make over-the-top promises. Grant warns: "Watch out for claims that they will prevent you from becoming a victim of identity theft -- that's something that should send up a red flag since no legitimate company will make that claim."
- Check with the Better Business Bureau and your state attorney general to see if any complaints have been filed against the credit monitoring service provider, the Federal Trade Commission advises.
- Shop around, but consider going with a brand name you know or an institution where you already do business, suggests Mike Schenk, senior economist for the Credit Union National Association. "It's always a good idea to go to someone you trust -- if you've had a relationship with a financial institution for a while and feel they operate in your best interest and the fees they charge are fair and transparent, that would be a good place to start," Schenk says.
Many service providers offer multiple options in credit and identity monitoring, and experts say it's important to determine which featuresyou want and make sure the service you are considering offers them. On the other hand, make sure you're not signing up for services you don't need.
Schenk says: "It's a big business, so there are a lot of providers of these services out there that generate a lot of income by selling consumers protection that they don't really need or levels of protection thatare far in excess of what they need."
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