What Is a Credit Monitoring Service?

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DEFINITION
A credit monitoring service sends alerts to consumers when changes occur to their credit reports.

A credit monitoring service sends alerts to consumers when changes occur to their credit reports. The purpose of a credit monitoring service is to watch over your credit report, particularly for changes that could be connected to fraudulent activity.

If you are thinking about subscribing to a credit monitoring service, learn how it works, how much it costs, and what alternatives you have for protecting your credit and identity.

Definition and Examples of a Credit Monitoring Service

A credit monitoring service alerts you when changes occur to your credit report. When changes occur to credit accounts, the service alerts the subscriber via text, email, or phone. This gives the subscriber the opportunity to take appropriate action. The timeliness of these alerts is valuable, especially as a fraud detection and prevention tool. Credit monitoring services are also effective tools for helping consumers stay on top of their finances.

Some instances where you’ll receive an alert include:

  • New inquiries
  • New accounts
  • An increase or decrease in your credit score
  • When a balance is paid off
  • When your credit utilization goes up
  • Suspicious activity

Consumers can verify information sent to them quickly and easily, and make corrections where needed.

How Credit Monitoring Services Work

Anytime consumers engage in activity that will impact their credit, credit issuers will send reports of this to the credit bureaus. These reports can include on-time or late payments, inquiries, balances, the status of accounts, and other credit-related activities for each consumer.

Credit card monitoring services take this information reported to the credit bureaus, repackage it in their own marketing materials, and send it out to the consumer. This reported information impacts consumer credit scores each month.

For example, when prospective homeowners decide to buy a home, they will seek to get preapproved for a mortgage. Their lender checks their credit and preapproves them for a certain amount.

To check the credit of the prospective homeowners, the lender sends a “hard inquiry” to the credit bureaus. This inquiry to the credit bureaus is picked up by credit monitoring services, which then send out an alert to the consumer.

The prospective homeowners can probably ignore the alert, as they’re aware of what inquiries are being made into their credit at the time. If, however, the consumer did not initiate the inquiry, they can take action to defend themselves against potential identity theft and fraud.

How Much Does a Credit Monitoring Service Cost?

There are free credit monitoring services as well as paid ones. Paid services typically offer more robust features and monitoring for multiple people.

Services range from approximately $10 for basic monitoring to $40 per month for more involved services, such as dark-web monitoring. Credit monitoring can also be done for free, but you’ll want to make sure you’re dealing with a reputable company when handing over access to your personal information for monitoring.

There are other trade-offs with a free credit monitoring service. These include frequent marketing pitches that come directly to your inbox, typically in the form of mortgage, loan, and credit card recommendations.

When you give a credit monitoring service access to your credit report, you are also giving the service “written instructions” to access your information in accordance with federal law. This allows the service to provide you with credit monitoring—and it allows the service to use your information for marketing and other services, including sharing it with third parties. Check the credit monitoring sevice’s terms and conditions if you’re concerned about how your credit information may be used.

Alternatives to a Credit Monitoring Service

If you don’t want to pay to have your credit monitored for you, you can do it yourself.

Consumers are also entitled to a free credit report each year from annualcreditreport.com. You can have one report per year from each of the credit bureaus (Equifax, TransUnion, Experian), so you’re effectively looking at three free credit reports per year. You may also pay for a credit report whenever you like. You’re also due a free credit report in the following scenarios:

  • When a credit application is rejected
  • When an application for employment is denied
  • When you’re not approved for insurance
  • Your information was compromised in a data breach
  • You’re out of work and plan to look for a job within 60 days
  • You’re on public assistance such as welfare
  • Your report is inaccurate because of identity theft or another fraud
  • You have a fraud alert in your credit file

Frequently checking your credit can help you spot fraud should it ever occur.

Key Takeaways

  • A credit monitoring service sends alerts for activity on your credit report.
  • A credit monitoring service can help you prepare your credit for major purchases and life events.
  • Reviewing your credit often can help you catch signs of fraud and identity theft early.

Article Sources

  1. Federal Trade Commission. "Free Credit Reports." Accessed Nov. 19, 2021.