What Do Credit Monitoring Services Do?

In my articles in the past, I've mentioned credit monitoring services, and how they offer free credit reports as an enticement to try their services. Up until now, however, I've never explained what these monitoring companies provide to their customers. So let's take a closer look at them today.

Monitoring Consumer Credit

The services offered by credit monitoring companies will vary from one company to the next, but they all do basically the same thing. They monitor your file with one, or possibly all three, of the credit reporting companies (Equifax, TransUnion and Experian). The idea is that if somebody tries to use your identity for some kind of financing, such as an auto loan, you'll find out about it right away.

At the time this article was published, I could not find any statistics on how well these credit monitoring services work -- i.e., how many cases of identity theft have been spotted by monitoring. However, the better services will check your credit files every business day, and they'll notify of you all new activity. So I can only imagine they're an effective way to spot fraudulent activity.

Sure, you can look at your credit reports for yourself, and you can obtain them once a year for free for this very purpose. But the added benefit of a monitoring service is the daily vigilance they provide.

Do You Really Need It?

Do you really need a credit monitoring service to protect your identity? Ultimately, this is a personal choice. Most people go their entire lives without being the victim of fraud. But the minority of people who fall victim to identity theft would probably tell you that monitoring is a good idea. So it really depends on whom you ask.

On the other side of the fence, some consumer groups say that credit monitoring services are often not worth the money. Or at least, that they weren't in the past. But these same groups concede that ID theft protection is getting better all the time.

According to this Consumer Reports article, ID fraud protection services could "overtake credit-report monitoring as an effective identity-theft tool by year-end 2009." By the way, when they refer to fraud protection services, they are talking about comprehensive identity theft protection, as opposed to credit monitoring alone.

If you take your financial and identity security seriously, then you may find that the small monthly cost for credit monitoring service is worthwhile. Some people will feel differently. Like I said, it's a personal choice.

Where to Find These Services

If you want complete coverage, you should sign up for a service that monitors all three of the credit reporting bureaus. These three companies do not share data, so it's possible to have fraudulent activity on one credit file but not the other two.

To find such comprehensive coverage, I recommend visiting Credit.com. They offer credit monitoring services that will watch all three of your bureau files. You can also sign up for monitoring through the bureaus themselves (Experian, Equifax and TransUnion), but this will only provide coverage for that one bureau.