Credit monitoring: Is it worth paying for?

3 min read

Following the 2017 Equifax data breach, the credit bureau offered consumers up to $125 from the $700 million settlement that Equifax paid the Federal Trade Commission.

But with the large number of people claiming the loss, chances are high that you may not actually receive that much money. You might not even recoup the cost of any credit monitoring services that were purchased following the breach.

It might be worthwhile, instead, to accept Equifax’s offer of free credit monitoring services for up to 10 years. The first four years covers all three credit bureaus — Equifax, TransUnion and Experian – while the next six years only covers Equifax.

Before you decide, you should evaluate the cost and value of credit monitoring. If you weren’t impacted by the Equifax breach and don’t qualify for free monitoring or cash from the credit bureau, you may still want to invest in a credit monitoring service. It helps to weigh your options.

What credit monitoring means

Credit monitoring simply means keeping an eye on your credit by checking your credit reports and your credit score. Even reading your credit card statements closely for charges you don’t recognize is a form of credit monitoring. Since a good credit score affects the interest rates you’ll receive on loans, mortgages and credit cards, you’ll want to know your status before making a major purchase.

When you view your credit reports, you’ll see your credit utilization ratio – the amount of debt you have relative to your available credit. This number makes up 35 percent of your credit score, and it can paint a vivid picture of how well you’re managing credit. You’ll also see your history of on-time payments for the past three years, which provide more insight into your overall financial health.

By monitoring your credit, you’re more likely to find out if there’s been a data breach that could result in credit card fraud, costing you money. You’ll also find out quickly if someone has applied for credit in your name or charged up one of your credit cards.

Typically, when people talk about credit monitoring, they are referring to a service that monitors their credit for unusual activity, including new account openings and data breaches. A credit monitoring service should also provide you with copies of your credit report on demand.

The cost of credit monitoring services

Credit report monitoring services range from $0-$26 or more per month. LifeLock’s Ultimate Plus plan provides notifications of data breaches, and insurance protection if you are a victim of credit card fraud or identity theft for $26.99 a month.

Free services, like Bankrate’s credit monitoring, typically show your credit score and a history of all your revolving accounts and payments. You will also receive alerts when your credit score changes or if there’s a negative item on your credit report.

You can monitor your credit yourself by requesting free copies of your credit reports annually. If you visit once every four months and request a report from Equifax, Experian, or TransUnion, you’ll have year-round monitoring.

You can also keep an eye on your FICO or VantageScore credit scores for free through Discover and Chase.

Comparing credit monitoring services

Credit monitoring services vary in the fees they charge as well as the benefits they provide. Most services allow you to view a summary of the data on at least one of your credit reports and view your credit score.

Some services show your FICO score, other services provide your VantageScore 3.0. Both the FICO score and the VantageScore range from 300 to 850 using data from the three credit bureaus. Your VantageScore 3.0 can show you whether your credit score is trending up or down. Bankrate’s credit monitoring service even shows how well you’re doing in each of the areas that make up your credit score.

Some of the higher priced credit monitoring services bundle identity theft alerts into the package and will even search the internet to alert you if your information is being spread. Some services provide insurance for up to $1 million in fraudulent charges, lost wages, legal fees and other costs if your identity is stolen while you’re subscribed to the service.

If you’re paying for a credit monitoring service, you might want to find one that provides your FICO score and reports data from all three credit bureaus, as well as insurance protection in the event of fraud.

Bankrate’s credit monitoring service provides everything you might want in a free credit monitoring service, including alerts when your credit score changes or when there is activity on your credit report. All data is pulled from TransUnion.

Safety calls for more than monitoring

It’s important to remember that credit report monitoring only alerts you to problems. It can’t prevent a data breach or identity theft. If you’ve been a victim of identity theft or credit card fraud recently, investing in a credit monitoring service might be a good idea.

You may also want to monitor your credit more closely if you are planning to take out a loan, open a new credit card, apply for a mortgage or lease a new car.

You have the option of placing a fraud alert on your credit report through any or all of the credit bureaus. Fraud alerts last for 90 days and prevent new accounts from being opened in your name without your permission.

With so many free services that provide your credit score, credit report information and expert advice for making better financial decisions, you may not need to pay for a credit monitoring service.