Why Credit Monitoring?

Why Monitor My Credit Reports?

Your credit represents a vital resource—good credit can help you buy a house, open lines of credit, even get you the job that you want. However, your credit scores change constantly based on your financial activities, and they are susceptible to manipulation, either purposeful or accidental. For example, a utility company may make a mistake and fail to credit a payment for you, thus sending you to collections; or an identity thief might take out a credit card in your name and abuse it, resulting in a black mark against you. Whatever the case, regular monitoring of your credit report lets you act sooner rather than later should you catch a problem. Regular monitoring of your credit allows you to protect it, just as antivirus software constantly monitors a computer to keep it clean from infection.

Where Your Credit Report Comes From

The three national credit reporting agencies—Experian, Equifax, and TransUnion—collect, categorize and classify financial data gathered from various sources:
• Credit card companies
• Utility companies
• Debt collection firms
• Public records and court documents

Each company puts this data together as your credit report, and though the report can vary slightly from company to company, it should look largely the same, listing the same creditors and debts. From this information, the credit reporting agencies determine your credit score by applying proprietary algorithms to the data. The score represents a snapshot of your credit history, allowing potential lenders and employers to quickly guess your level of financial responsibility. Scores can vary, based on the algorithm used, by as much as fifty points from one credit organization to another.

How To Get Your Credit Report

In 2003, the U.S. government passed the Fair and Accurate Credit Transactions Act (FACTA), a measure created to protect consumers from identity theft by providing better access to credit information, requiring secure dumping of sensitive consumer data, and allowing customers to place fraud alerts on their credit files in cases of identity theft. The best-known of these provisions is the one that allows consumers to request a free copy of their credit report once every twelve months, from each of the three reporting agencies.

In conjunction with the Federal Trade Commission, the three agencies have established a Web site, annualcreditreport.com, for customers who want their free annual report. These reports do not include the credit scores—those numbers are proprietary, and the credit agencies do charge for them—but the report will certainly tell you if something suspicious is going on. Further, you can receive three credit reports each year by staggering the ones you receive from each company. In this way you can monitor your credit more frequently, and thus more closely.

Be wary, however—there are companies that claim to provide free credit reports that are doing so in order to sign you up for a long-term credit monitoring service (see below). They give you the free report, then begin charging your card in subsequent months if you don’t tell them not to. If you simply want the free reports you are entitled to, go straight to annualcreditreport.com and don’t bother with these services.

Credit Monitoring Services

If you don’t have the time or inclination to monitor your own credit, there are a number of reputable companies that will do the job for you. In fact, each of the three credit reporting agencies offer the service, along with many smaller companies that will provide similar services. Some of them offer credit monitoring as part of a suite of benefits, and market themselves as identity protection services. Others will simply check your credit report on a regular basis and contact you if any suspicious activity appears.

When shopping for a credit monitoring service, keep the following factors in mind:

• Does the service provide credit scores, as well as the report itself?
• Does the company provide any insurance should you have your identity stolen?
• How frequently does the company issue your credit alerts—once each quarter or week, or even daily?
• What kind of events (e.g., name changes, major new debts, etc.) will raise a flag, and thus cause an alert to be issued?

Credit Repair

Those considering credit repair companies may benefit from credit monitoring by tracking credit score increases over time.