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Banking Basics

How Do Credit Monitoring Services Work?

Credit monitoring services help you track changes to your credit report and alert you when there’s new activity. Here's what you should know about credit monitoring before you sign up.

Rachel Velez • May 5, 2022

In This Article

  1. What is credit monitoring?
  2. How does a credit monitoring service work?
  3. What will a credit monitoring service do for you?
  4. What won't a credit monitoring service do for you?
  5. Why do you need credit monitoring?
  6. Can you monitor your own credit?
  7. What is the cost of using credit monitoring companies?
  8. FAQs
  9. Final thoughts: Finding the best credit monitoring service for you

Credit is super important when it comes to things like loan approvals, insurance premiums, and rental applications. Having control of your credit can help you get ahead in life and end up saving you time and money. While checking your free annual credit report is always a smart idea, monitoring your credit score and report year-round is just as important.

But keeping track of your credit isn’t always easy. There are several companies that now claim to offer the whole package when it comes to credit monitoring, especially with the uptick in large-scale data breaches. With more of our personal information being stored online, chances are you or someone you know has probably been impacted by a data breach, and that’s where credit monitoring can help.

Let’s take a closer look at how credit monitoring works.

What is credit monitoring?

Credit monitoring is essentially the process of overseeing individuals’ or businesses’ credit files. It’s a type of credit protection that’s usually offered through credit bureaus, credit card issuers, banks, or independent companies. Credit monitoring tools will regularly check your credit activity and track other important changes, including applications for new accounts, requests for account access from unknown devices, and the use of your accounts in locations you don’t usually spend time in.

Unfortunately, savvy identity thieves are able to use your information to open up new accounts without you knowing. Most people don’t know about identity theft until there’s a problem. Lucky for you, though, you can implement a credit monitoring service to proactively protect your information as well as your credit. These tools can also track your credit score, so you know exactly where you stand, even if you don’t have any credit cards.

Credit monitoring is the best way to stay on top of changes to your credit report so you can address fraudulent activity faster and minimize the potential damage. But keep in mind that credit monitoring doesn’t prevent identity theft. It’s more of an early warning system that lets you know if someone is misusing your personal information. And the sooner you know, the sooner you can do something about it and protect your credit.

Monitoring your credit, either with a credit monitoring service or on your own, is an important step to protect your finances and credit health. Our digital information can be anywhere if it’s not correctly safeguarded, so credit monitoring is a matter of financial due diligence.

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How does a credit monitoring service work?

Credit monitoring services work to scan your credit report for any changes or suspicious activity. A credit monitoring service watches over your credit reports, alerting you to any changes in your accounts, which can help you spot signs of identity theft right away. The service tracks changes in your behavior as a borrower to notify you of potential fraud, as well as changes to your creditworthiness. 

After being notified, you can identify whether the changes on your credit report were accurate, fraudulent, or even accidental and take the appropriate actions to fix the situation. Credit monitoring services can also help you keep an eye on activities that can affect your credit score, including hard inquiries, new accounts, credit card balances, and missed payments. 

What will a credit monitoring service do for you?

Credit monitoring services will monitor your credit report for you and alert you whenever there’s new activity. Each company has its own process and procedures, but it’s likely that it would let you know through a notification within 24 hours if there was activity on your report. 

By using a credit monitoring service, you can always have eyes on your finances and be ready to act on new credit opportunities. Here are some aspects of your credit you can expect credit monitoring to report on:

  • Hard inquiries
  • New accounts or loans
  • Existing account changes
  • New public records
  • Address changes

What won't a credit monitoring service do for you?

Credit monitoring won’t recover your identity or report suspicious activity to your credit card company or financial institution. Once you’re notified of unexpected activity on your credit report, you’re responsible for taking action to freeze your credit, contact your credit card companies, and recover your identity.

Credit monitoring can help you know where your credit stands at any time. But it’s important to know that it’s not all-encompassing — it likely won’t protect you from fraud or guarantee that your credit will improve. A credit monitoring service will also most likely not be able to stop someone from applying for credit — or a job — in your name or set up fraud alerts, among other things.

Why do you need credit monitoring?

Even the most financially careful of us are potential targets for identity theft and fraud. Likewise, anyone with your personal or financial information can put you at risk. If you’re not currently monitoring your credit, here are a few reasons why you should:

  • It can help you improve your overall financial health.
  • It can help you detect identity theft. 
  • It can help you become aware of inaccurate information.
  • It can save you time by not having to monitor your credit on your own.

As more sensitive information, including Social Security numbers and credit card information, is stored online, a digital data breach can result in your personal information getting into someone else’s hands. You can also pay for identity theft and purchase protection insurance through a credit monitoring service. 

This can save you money if you do ever encounter fraudulent activity and take away the added stress these events bring on. Luckily, credit monitoring gives you an instant notification if and when there are changes on your credit report so you can take action.

Can you monitor your own credit?

You can monitor your own credit without the help of a credit monitoring service — however, it can be very time-consuming and may not be as effective as using a free or paid service. As a consumer, you’re allowed to access your credit report from each of the 3 credit reporting agencies every 12 months through AnnualCreditReport.com.

You should try and use secure devices with a screen lock when accessing personal information digitally and avoid using public Wi-Fi, if possible. Also, make sure your bank and credit card issuers have your updated contact information, so they can reach you in case of a security breach. 

Tips for monitoring your own credit

Whether or not you choose to sign up for credit monitoring services, there are some other steps you can take to safeguard your personal information. Anyone can better protect their credit by completing the following actions that a credit monitoring service doesn’t cover:

  • Check bank accounts on a weekly basis and review activity
  • Set credit card alerts that notify you of changes made to your account
  • Review online credit card statements every month
  • Set strong passwords and use different passwords for various accounts and update them regularly
  • Freeze your credit if you’re worried about identity theft

What is the cost of using credit monitoring companies?

The cost of a credit monitoring service depends on the company and which features you choose to use. Some allow you to use their services for free, while others can range from around $10 to almost $40 a month.

With a free credit monitoring service, you should have everything right at your fingertips such as your latest credit score, access to your credit history, and an alert system for changes to your report. With a paid credit monitoring service, it should monitor reports from all 3 credit bureaus and offer insurance protection, for an extra cost, in the event of fraud. Paying for credit monitoring or identity theft protection service can make sense in certain circumstances.

If you don’t have the time to monitor your credit reports or you’ve been a victim of identity theft, paid services can be helpful. When you decide to pay for credit monitoring, shop around first to make sure you find the right service that fits your needs. Before signing up, you’ll want to ask these questions:

  • How extensive is the credit monitoring? 
  • Does the service monitor reports from all 3 of the major credit bureaus? 
  • Do you also need identity theft insurance, and what does it cover? 
  • Will the service help you recover from a data breach? 

Free credit monitoring vs. paid credit monitoring

Your bank or credit card company may offer you free credit monitoring services, but there are also paid services that bill you on a monthly or annual cycle. These paid services can offer additional benefits, such as dark web and public records monitoring. Other add-ons may include insurance protection, meaning that you wouldn’t be held liable for charges that occur if your identity is compromised or stolen during a data breach.

It’s imperative to understand exactly what your credit monitoring covers and what it doesn’t. If you do choose a paid service, consider how the cost fits into your monthly budget and if it offers the features you’re looking for. It might make sense to use a paid service if you’re already a victim of identity theft, are at high risk for it, or if you just don’t want to monitor your credit on your own. No matter what, it’s always a good idea to assess the options and your needs to see if the investment is worth it.

While a paid service may sound unnecessary at first, it’s important to understand that you often get what you pay for with credit monitoring services. A free product may be enough for some people, but for others, it may be worth it to pay for more comprehensive monitoring to better protect your financial well-being.

Free Credit Monitoring Eligibility

If you’re the victim of a data breach, you may be eligible for free credit monitoring services for a specific period of time. Millions of consumers were granted free services after an Equifax data breach in 2017.

FAQs

What is credit protection?

Credit protection is just one of the many types of consumer protection. It’s a collection of laws, regulations, and services put in place to secure credit health for both individuals and businesses. Credit protection efforts mostly work to keep consumers safe from any practice that might hurt their ability to obtain credit in the future or impact their credit score in a negative way.

The term credit protection refers to 4 different types of credit protection services, including:

  • Credit monitoring and alerts
  • Identity theft protection
  • Purchase protection
  • Credit insurance

What if I suspect identity theft?

If a credit monitoring service finds evidence that someone has stolen your identity, the key is to act quickly. First, if a thief has opened a new credit card account or loan in your name, call the financial service providers behind these accounts and inform them that you’re a victim of identity theft. 

Check your other accounts, too, for suspicious activity. You should continue monitoring your credit reports and financial accounts for signs of fraudulent purchases. The faster you spot them, the quicker you can dispute them. You can also report identity theft to the Federal Trade Commission (FTC) through IdentityTheft.gov for additional help with recovering your identity.

Does using a credit monitoring service hurt my credit?

Monitoring your credit doesn’t harm your score and won’t create any negative remarks or hard inquiries on your report. If you choose to access your own credit file, it does result in a soft pull or inquiry, which means it will be seen on a personal credit report. 

Can I use a credit monitoring app?

A lot of credit monitoring services have mobile applications you can download and utilize. Popular credit monitoring services offered by Credit Karma and Mint both have apps you can access on a mobile device or tablet to easily monitor your credit online.

Are free credit monitoring services good to use?

Most credit monitoring services aren’t free, and if they are, they typically don’t come with all of the bells and whistles. If you find a free service that does what you’re looking for, that may be a good fit for now. However, it’s important that you reevaluate your needs over time to ensure you’re using the best tool for your finances. 

Final thoughts: Finding the best credit monitoring service for you

Credit monitoring is ultimately about awareness. The sooner you find out about data breaches, new accounts, or loans opened in your name, the faster you can react to protect your personal information from further damage and maintain a good credit score. 

Start by determining your needs and assessing the type and speed of information from the different options to figure out which is the best one for you.

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