With fraud on the rise, many people have turned to credit monitoring as a safeguard against identity theft.
Credit monitoring services notify you of changes made to your credit reports so you can take action against potential misuse of your personal information. If you've been a victim of fraud or simply want to be proactive, you may consider signing up for one of these services to help you stay on top of any changes to your credit file.
But there are some limits to what these services offer, and it's important to understand how they work before you sign up for a program, especially if you're paying for it.
Below, CNBC Select breaks down everything you need to know about credit monitoring so you can decide what service is right for your needs.
Credit monitoring services do just what the name says — monitor your credit. They track the credit history shown on your credit report, then alert you of changes via email, text or phone. Granted, you can do this on your own, but these services provide an automated and faster way to track changes to your comprehensive credit file.
The exact activity reported by your credit monitoring service varies by provider, but it may include the following:
It may seem like credit monitoring services keep track of a lot, but these tools have their limits. Below, we explain where credit monitoring falls short.
While credit monitoring is a great tool to spot potential signs of fraud, it's not a holistic approach to preventing identity theft or unauthorized transactions.
When you sign up for credit monitoring, you'll receive alerts and resources to help you identify and protect against possible theft, but these services can't actually guarantee fraud prevention. At best, they keep you instantly informed so you can take action as you notice something is off.
Here are several things credit monitoring doesn't do:
If you want to protect from these types of fraud and others, check out our tips at the end.
There are a number of paid and free credit monitoring services that can help keep track of your credit.
Due to a number of high-profile data breaches — notably Equifax in 2017 and Capital One in 2019 — many Americans qualified for free credit monitoring services. But if your personal information wasn't exposed during a data breach, and therefore you're ineligible for the mandated free credit monitoring, there are alternative free resources available, as well as paid options to consider.
Keep in mind, just because a service requires you to pay doesn't necessarily mean it's better. To determine the best service for your needs, review a variety of options to see what is and what isn't offered.
For instance, Experian offers two credit monitoring services: CreditWorks℠ Basic and CreditWorks℠ Premium. The Basic plan is free to use, while Premium currently costs $4.99 for the first month then $24.99 per month.
Both plans provide different services. The Premium plan offers a more extensive monitoring service that checks credit reports from each credit bureau (Experian, Equifax and TransUnion) versus the Basic plan, which only looks at Experian. This is a pretty major difference, since it's a good idea to monitor all three credit reports because the information on each report can differ.
In addition, the alerts you receive with the Basic plan only include new credit inquiries and new accounts — not balance changes, credit utilization, dormant accounts and other features offered with Premium. In this case, if you want a comprehensive credit monitoring service, the Premium plan would be the better choice.
Credit monitoring alone isn't a comprehensive way to protect yourself from fraud — but if you sign up for credit monitoring while taking additional actions, you can further protect your finances. Here are some tips:
While there's no way to completely prevent fraud, rest assured that many credit cards, such as the Citi® Double Cash Card and the Blue Cash Preferred® Card from American Express, offer $0 fraud liability. That means you won't be held liable for unauthorized charges on your account when you catch them early and report them.
For rates and fees the Blue Cash Preferred® Card from American Express, click here.