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Pay for credit monitor or DIY?

By Janna Herron · Bankrate.com
Monday, April 9, 2012
Posted: 3 pm ET

Imagine you're one of the 1.5 million consumers whose debit or credit card information was leaked in the recent security breach at Global Payments. (For your sake, I hope this is purely hypothetical.)

After closing the accounts that have been tampered with and checking your credit reports for nefarious activity, is it time to invest in a credit monitoring service?

For a monthly fee, these services -- offered by banks, credit reporting bureaus, FICO itself and third-party companies -- provide access to your credit reports (and score, in some cases) along with email alerts when something on the report changes.

The advertising is enticing.

"You could learn about a potential breach or credit card theft before your credit card lender," says myFICO spokesman Anthony Sprauve. "It's a prudent thing to do in this day and age. None of us should expect someone else to be looking out for us."

Well, unless you pay them.

The fee for these services typically runs up to $20 a month, and the service can monitor just one or all three major credit reports. For example, FICO's cheapest plan, at $4.95 a month, provides only your TransUnion credit report and FICO credit score once a quarter.

This is an important point, because lenders don't always report to all three credit bureaus. So, if you're just monitoring your Experian credit report, a fraudster could open a new account and you may or may not see it.

Of course, there are other, cheaper ways to safeguard your information. It just takes some patience and discipline.

First of all, you should always put an initial fraud alert on your credit reports after finding suspicious activity. The alert -- which is free and lasts 90 days -- tells lenders to take extra steps in verifying your identity before extending credit. You also get a free peak at all three credit reports, so you can see if there are more suspicious transactions out there.

After 90 days, you can either put another initial alert on your report or place an extended fraud alert -- for free -- on your account if you have an identity theft report from the police. That alert lasts seven years!

Don't forget: You're entitled to a free credit report from each bureau every 12 months under federal law. Get yours from AnnualCreditReport.com.

And if you want more protection, there's always a credit freeze, which keeps lenders from pulling your credit report. That essentially makes it impossible for fraudsters posing as you to qualify for new credit. The fee for the freeze depends on your state, but it doesn't run more than $10 generally. It's a one-time fee, but there's a fee to unfreeze your report as well.

But even if you freeze your report, unfreeze it and then freeze it again, it'll cost less than three months' of credit monitoring and it's 10 times safer.

Have you ever used a credit monitoring service? Did you like it?

Follow me on Twitter: @JannaHerron.

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1 Comment
Kate
April 09, 2012 at 6:06 pm

I have tried both - the credit monitoring service and the security freeze. I far prefer the security freeze - it is more affordable and I feel like I have more control over what information is shared.