What is Credit Monitoring? How to Safeguard Your Credit Reports & Scores

I definitely sympathize if you’re not much of a numbers person, but certain numbers can tell us a lot about where we are — and where we want to go. If you want to track how your diet is doing, you step on a scale or take your blood pressure. If you’re wondering why you’re tired all the time (besides general adulting), you count up how many hours of sleep you’re getting per night.

If you want to track your financial standing, you monitor your credit.

Credit monitoring is the process of checking your credit report to see if there are any new changes. 

You can monitor your credit yourself, but it’s much easier to have a third-party service do it for you. Most services will charge a monthly or annual fee, but if you know where to go, you can save money by using free credit monitoring services.

In my opinion, credit monitoring has never been easier (or cheaper) than it is today. Personally, I’ve signed up for multiple free services that give me a heads up whenever something changes on my credit. I can keep my finger on the pulse of my credit without stressing about it.

Credit monitoring can help you avoid huge credit score drops, take action against fraud, and stay on track to meet major financial goals like applying for loans or buying your dream house. I’m going to break down how credit monitoring works, how to choose a service, and the benefits of credit monitoring.

Before you start paying for credit monitoring, you need to understand exactly how it works and what it can do for you. Here’s what I want you to know about credit monitoring: 

Alerts and Notifications

When you sign up for a credit monitoring service, you will provide personal information that allows the service to track your credit profile. You will have to share your full name, Social Security number, and contact information. You may have to provide other details depending on the service. 

I know, this probably seems like a scam or an easy way to get your identity stolen but if you use a reputable service, your information should be kept safe.

Credit monitoring services regularly check your accounts and report when anything new pops up. 

Credit monitoring can include the following types of notifications:

• Your information has been found in a data breach or hack
• Higher than normal credit utilization percentage 
• New account opened
• Old account closed
• Late payment 

How often you receive alerts depends on what you sign up for. You can scale back alerts to a monthly schedule or get alerted as soon as anything changes. Just make sure that you’re checking your email regularly. Since I use Gmail, I make sure to check both my Promotions and my Updates boxes so I don’t accidentally miss those emails.

You can move those credit monitoring emails to your primary inbox to ensure they don’t get lost in Promotions or Updates – or, worse, stuck in the spam folder.

Access to Credit Reports

Most credit monitoring services will show you a copy of your credit report. Depending on the type of credit monitoring service, you may be able to see one of several credit scores, either from FICO or from VantageScore.

Keep in mind that the free score you see may be a little different than the score your lender sees if you apply for a loan, but it should be pretty similar.

You can also see your credit report for free as often as once per week by visiting www.annualcreditreport.com. Yes, you’ll have to manually log in to view these reports, and you’ll have to log on three different times to view your credit report from each of the three major bureaus: Experian, Equifax, and TransUnion. 

Still, free is free, and this option doesn’t require a credit monitoring service. I try to check my official credit report once every three months, at least. That way, I know if any funny business is going on.

If you’re interested in credit monitoring, there’s no one-size-fits-all solution. In fact, there are several different types of credit monitoring services you can use. I’ll give you a rundown of the options out there so you can make an informed choice.

Free Tools

Even as a finance expert, I only use free tools to monitor my credit. Contrary to popular belief, you don’t have to spend money to monitor your credit. In fact, many free tools let you monitor your credit without a lot of hassle. 

Some free tools also have upgraded paid versions. Make sure you know which one you’re signing up for when creating an account. In general, if you have to input payment details (like your credit card number or PayPal account), then you are likely signing up for a paid credit monitoring service with auto-enrollment. 

If you’ve been the victim of identity theft or a company hack, you may receive free credit monitoring services from the company that let your info slip. These services usually only last a limited amount of time before they expire. 

You may also have to manually sign up for these services. If you’re part of a data breach, keep an eye on your mail to see if you receive one of these offers. Of course, you’ll need to verify the offer is real —it could be a scam trying to get your personal information.

Another free option is to freeze your credit with all three credit bureaus: Experian, TransUnion, and Equifax. Freezing — and thawing — your credit is always free. It’s a line of protection to prevent someone from opening new credit cards or loans in your name.

You can freeze and thaw your credit as many times as you want. Freezing your credit doesn’t prevent someone from stealing and using your existing credit cards, but it does prevent new accounts from popping up and hurting your credit score. 

In my personal opinion, most people do just fine with a free credit score service. There are so many free, reputable services on the market. Personally, I have signed up for several free services so I never miss anything related to my credit. 

Paid Services

Each of the three credit bureaus offers paid credit monitoring services. Think of it like getting information straight from the source — no middlemen or telephone game required. The credit bureaus are a direct line to your credit score.

Your credit score information is like a piece of juicy gossip. Sure, you can go to all three people involved and get their different sides of the story — or you can ask for the family gossip to sum it up for you. We all have that family member who keeps up with everybody and is always “in the know.” Sometimes, it’s just easier to ask them for a rundown.

If you want to get the details from all three bureaus, you can sign up for paid monitoring from a service that automatically pulls information from all three.

The cost of paid credit monitoring services varies widely, starting as low as $5 per month. However, some plans can cost almost $40 a month. That’s almost $500 per year.

Honestly, I don’t know if paid credit monitoring is worth it for the average consumer. For example, if you sign up for the Equifax Credit Monitor™ program, you’ll receive access to your VantageScore credit score but not your FICO credit score. 

The FICO credit score is the one used most often — about 90% of the time — by lenders evaluating your loan or credit card application.

If you’re paying for credit monitoring, I would strongly urge you to make sure that you’re seeing your FICO credit score. 

Some paid credit monitoring plans only check two credit bureaus — not all three. That’s just no good. Choosing a plan that only provides access to one or two credit reports doesn’t give you a comprehensive view.

Identity Theft Protection Plans

I have done a lot of research comparing credit score monitoring services, and the safety features on some genuinely impress me. Many services include identity theft protection plans as part of the deal or as an add-on. 

These services are much more extensive than basic credit monitoring. They focus on protecting your identity and can take care of any issues that come up if your identity is stolen. 

For example, a plan that offers ID theft insurance will cover the costs that come from a stolen identity. 

Identity theft protection services go beyond monitoring your credit to focus on keeping your identity safe. Some plans even offer insurance that will cover some of costs related to having your identity stolen.

Identity theft protection plans may be more expensive than regular credit score monitoring. Certain hybrid services offer credit monitoring as well as identity theft protection plans. 

It can take a long time to resolve identity theft problems, depending on the criminal activity. Maybe they bought a luxury car in your name or used your credit to take out a loan. That’s when having an identity theft protection plan can help.

Consumers regularly shell out their hard-earned money to credit monitoring companies — and for good reason. Here are the main benefits of paying for credit score monitoring:

Early Fraud Detection and Response

Credit monitoring doesn’t necessarily prevent fraud, but it can tell you as soon as fraud occurs. If you notice fraud early, you can act fast and hopefully have an easier time disputing and removing it from your credit report. 

Plus, most credit cards give you a 60-day limit before you’re liable for any unauthorized charges on your credit card. If you don’t notice fraud within those 60 days, then you’re on the hook for those payments. 

I’ll admit even I’ve accidentally let a fraudulent charge slip through on occasion. That happens when I’m not checking my credit card statement carefully every month. 

Now let’s say you’re on vacation and get notified that your credit card information has been stolen and the thief has racked up thousands in charges. 

If you have credit score monitoring, you could be notified about this immediately. While it can be stressful to deal with fraud, it’s better to handle it as soon as it happens, instead of weeks or months later. 

Simplified Credit Management

Many credit monitoring services will calculate your credit utilization percentage, which is the second most important factor in your credit score. A high credit utilization percentage will negatively affect your credit score. 

You can technically calculate your credit utilization percentage by yourself, but it can take a few minutes and be complicated, especially if you have multiple credit cards. As someone with five active credit cards, I don’t recommend doing the math yourself because it can take too long to do it regularly.

Again, this is one way credit monitoring services can help you save time and keep your credit score in line.

Tracking your credit utilization is an easy way to prevent your credit score from tanking. If you’re told that your credit utilization is high, then you can work on paying down that card so your credit score remains solid.

Peace of Mind

Having a credit monitoring service is like having a security system for your house. It doesn’t necessarily stop break-ins from happening, but it can warn you of danger and mitigate your losses.

Just as having a security system can provide peace of mind while you’re on vacation, a credit monitoring service can help ensure that someone is always watching over your finances. 

If you’re like me, tracking your finances can feel like a part-time job on top of everything else you have to do. I like to think of credit monitoring services as an extra set of eyes that can help my credit score.

When you have credit monitoring set up, you will know if you’re actively doing something that is hurting your credit, like making late payments or having a high credit utilization ratio. 

Even more importantly, you’ll discover if someone else has stolen your information and opened new accounts.

You have a lot of options when it comes to credit monitoring services, and I want to make sure you make a good choice, so here are some tips to consider.

Assess Your Needs and Budget

When you’re looking for a credit monitoring service, the first step is to decide what you actually need. Even if you can afford to pay for a regular service, you may not need to.

Start by assessing what you already have through your current credit card companies and banks. They may already check your credit and send you regular alerts. I know that my Chase card has a free credit score service that’s easy to use. 

If you’re on a budget, take advantage of all the free tools you can access. Between banking apps, annualcreditreport.com, and free monitoring services, you may find enough information to stay on top of things.

Between all these different services, you may already have plenty of access to your credit report and credit score. You may just have to turn on notifications or make them more visible in your inbox. 

Again, freezing your credit can provide some basic fraud protection, especially if you don’t want to worry about checking your credit frequently.

Compare Features and Tools

Before signing up for a credit monitoring service — especially a paid one — do your research. You can start by reading various customer reviews for credit monitoring services before signing up. 

You can look up reviews through ConsumerAffairs.com, the Better Business Bureau, and Trustpilot. I even like consulting Reddit because it can be a good source for honest reviews about credit score monitoring options. 

When you compare services, you should see what you’re getting. If you’re choosing a paid option, look for one that uses information from all three credit bureaus. Credit bureaus don’t communicate with each other, so information that’s on one credit report may or may not be on the other two. 

Understand the Costs and Terms

There can be a lot of fine print when you’re signing up for a paid monitoring service. Read through the terms carefully to understand exactly how much you’ll have to pay.

For example, if you sign up for a free trial or special discounted offer, make sure you know what the rate will be once the promotional period ends. Also, see what the cancellation policy is and if there are any cancellation fees. 

Credit monitoring services often have different service tiers at different price points. Understand what you’re getting, how much you will pay per month, and if the service requires a lengthy contract.

Read the contract to see how easy it is to get a partial refund if you prepay for a six- or 12-month period. Some services may not allow partial refunds. In this case, a month-to-month option may be better.

You should also understand exactly what you’re paying for. Many credit monitoring services have different membership tiers, so it may not be clear exactly what you’re getting. Contact customer support if you’re not sure what you’re buying. 

I’ve said this before and I’ll say it again: I don’t think a paid service is the right choice for everyone, especially if you’re struggling financially.

Your credit score is a huge part of your overall financial health. Knowing what your score is and what’s on your credit report is key to having a solid grasp of your finances.

Credit Score Improvement

While most people use credit monitoring to prevent and avoid fraud, it’s also a great way to fix your credit. Many monitoring services will send credit report updates so you can find ways to improve your credit. 

For example, you may be notified if your credit utilization ratio has increased. This can give you the opportunity to review your credit card balances and find out what drove this change. If you don’t use credit monitoring, then you may not realize your credit utilization ratio has changed until you’re ready to apply for a loan or credit card.

You’ll also be notified if there are any major changes that could indicate fraud or honest mistakes. For example, if someone who has a similar name to you opens an account and it gets added to your credit report, you can find out and rectify the error.

Many credit monitoring services, especially the paid ones, can also show you a copy of your credit score. You may be able to see several versions of your credit score for different types of loans and credit cards. 

Most consumers think they only have one credit score, but there are different algorithms for the various types of credit products. For example, your mortgage credit score is used to qualify for a home loan, so it’s important to check on that if you’re shopping for a house.

In some situations, a high credit score can save you thousands or even tens of thousands in interest charges. It might be worth paying for a monitoring service if you’re thinking about buying a house or car soon.

Planning for Major Purchases

If you’re planning on taking out a mortgage, one of the best things you can do is improve your credit score and get it as high as possible. Your credit score has a huge impact on what interest rate you can qualify for. The better your rate, the lower your payment will be. For example, even a 60-point difference in your credit score can result in a significant interest rate gap. 

In this case, think of a paid credit monitoring service as a simple way to save more money in the long run. Once you’ve taken out your mortgage, you can always cancel your paid service.

Depending on your situation, it can take months or even years to boost your credit score, and credit monitoring is a good place to start. If you’re planning on buying a home with a partner, both of your credit scores will be used on the mortgage application. 

When planning to purchase a home, credit monitoring can help ensure your credit score is as good as it can get. The difference between an excellent and good credit score can easily be tens of thousands of dollars over the life of a 30-year mortgage.

You may want to use credit monitoring services for both parties since credit scores are always based on the individual, not the partnership. Some credit monitoring services provide special deals for couples or families, which can be more cost-effective than paying for services individually. 

Some parents even choose to monitor credit for their children because they’re often an easy target for identity theft. You can also put a credit freeze on your child’s credit, which will ensure that no one can open a credit card or a loan in their name.

Honestly, that’s the easiest — and cheapest — way to protect your kid’s credit score. I had a high school friend whose relative used his Social Security Number to open new credit cards. When he graduated high school and tried to open a credit card, he discovered that he had bad credit. It took years for him to fix the mess. 

Long-Term Financial Security

Even if you never plan on taking out a loan or credit card, your credit score still matters. In fact, it’s one of the most important aspects of your finances.

Your credit score may determine your car insurance premium. If you’re a renter, many landlords will run a credit check before letting you move in. If you have bad credit or no credit history, then you may not be approved for a lease — unless you can find a cosigner. 

On top of that, some jobs will run a credit check, especially if you work in a field that deals with security or requires high music standards. Bosses may want that assurance if you’ll be in a position that is susceptible to bribery. Having bad credit can make it harder to land a job in certain sectors.

Plus, you just never know when you’ll need to take out a loan or get a new credit card. 

Having a good credit score simply means maintaining a series of simple habits, including paying bills on time, avoiding fraud, and dealing with credit reporting errors quickly. I always tell people that unless you’re independently wealthy, having good credit is a must.

Regular credit monitoring doesn’t necessarily help you avoid fraud or mistakes — but it does help you catch them faster. I would say there’s no right decision on whether you should pay for credit monitoring or rely on a free service. 

If paying for a service will cause you any financial hardship, then a free option is best. However, if you don’t have the time to monitor your credit and want the highest level of security, then a paid option could be a good choice. No matter what you choose, just try to be consistent in reading your notifications and staying on top of everything.