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Do You Really Need Credit Report Monitoring?

If you live in America, you’ve probably familiar with a credit report.  Whether you’ve seen that catchy commercial with the guy who sings about his credit woes or you’ve caught an ad on radio, credit report monitoring services are becoming very common.  The real question is, why would you be interested in having a company monitor your credit history?  Can’t you do it yourself?

This is where it pays to understand the difference between getting your annual free credit report and having your credit record constantly monitored.  Everybody is entitled to one free credit report a year from each of the 3 credit bureaus (Equifax, Experian and Transunion).  You can get your free credit report at Annual Credit Report.  What you need to know is that this is a credit report and doesn’t include your credit score.  It also is only a snapshot in time of your credit history.  Just because your credit report is clean today doesn’t mean it will be next month.

Your credit score is a numerical indication of the quality of your credit history.  This score is based on a complicated (and secret) algorithm and usually ranges between 300 and 850.  Credit scores are created by each of the 3 credit bureaus, and by several other companies, so you can have more than one credit score.  However, the most universally recognized credit score is created by Fair Isaac, the company that produces FICO scores.  The higher your credit score, the less of a credit risk you are to lenders and the more likely you are to get a loan.  The bottom line is that knowing your credit score is a good thing and your annual free credit report doesn’t include this information.

If you want to know what your credit score is, you need to purchase it.  You can go through the process of doing this, but once again this is only your credit score on a certain day.  If you credit score is 720 this week, it could be 690 next week/month/year.  It all depends on what is going on with your credit information.

The only real way to constantly and consistently stay on top of your credit report and credit score is to sign up for credit report monitoring.  Remember to choose the best credit report service you can find. You should make sure you’re getting “3 bureau” credit monitoring. “3 bureau” refers to the 3 credit bureaus: Equifax, and TransUnion.  You need to monitor all 3 bureaus because a change to your credit report usually only occurs at one bureau.

Although you’ll need to pay a monthly fee for a credit report monitoring service, it’s much cheaper than buying your credit report from each of the 3 credit bureaus every day and trying to monitor your credit record yourself.  Additionally, credit report monitoring will benefit you in 2 ways.

1. Save Money.  Staying on top of and aware of your credit history can save you thousands.  Companies use your credit history and credit score to decide if they’re going to lend you money.  Your credit history is also used to determine the interest rate you’ll get on your loan or credit card.  If your credit score is high (ie, over 760) you’ll receive a better interest rate than if your credit score is low (ie, 630).  Someone with a lower credit score can literally pay $50,000 – $100,000 more over the course of a 30 year mortgage than someone with a high credit score.  That’s real money!
2. Identity Theft Prevention.   Subscribing to a credit report monitoring service will help you stay on top of suspicious activity involving your credit history.  The first sign of identity theft is usually a change to your credit report, often a credit inquiry prompted by the thief trying to open an account in your name.  Your credit history will be constantly monitored and you’ll be notified when a change occurs.  The better companies go a step beyond this and even monitor public records and the internet for any use of your personal information (SSN, credit cards, etc) or fraud.   This means that if something relating to your credit history or personal information happens, you’ll find out in real time and can quickly move to resolve the issue.

About the Author

Tasha writes for NextAdvisor.com, a trusted, independent source for learning about Credit Services.