Should You Ever Pay for Credit Monitoring Services?

credit monitoring

Sometimes it seems like not a day goes by without hearing about another data breach. Data hackers can hit retail stores, hospitals, even universities at any moment, and your personal information could be affected.

That’s why it’s not surprising to see a rise in credit monitoring services. Especially when it seems like the best way to avoid being victimized by fraud is regularly reviewing our credit reports.

Yet, the question remains if it’s worth paying for credit monitoring services, or if we should just do it ourselves. Read on to find out what’s best for you.

What are credit monitoring services?

The Consumer Financial Protection Bureau (CFPB) describes credit monitoring services as commercial services that:

  • Charge you a fee to watch your credit reports.
  • Alert you to changes to the accounts listed on your credit report.
  • Usually alert you of changes to your accounts by email, text message, or phone.

One way you might have already heard of credit monitoring services is if you’ve been a data breach victim. In order to alleviate the fears of customers after a company endures a data breach, companies that have been hacked may offer victims one year of free credit monitoring.

In fact, the Federal Trade Commission (FTC) recommends it. Here’s what the FTC says in a response guide for businesses who suffer a data breach:

Consider offering at least a year of free credit monitoring or other support such as identity theft protection or identity theft restoration services, particularly if financial information or Social Security numbers were exposed. When such information is exposed, thieves may use it to open new accounts.

The whole point of credit monitoring services is to ensure accounts aren’t being opened in your name by thieves. And while it’s always good to keep a close eye on your credit report for this very reason, it becomes a lot more important when your information has been exposed through a data breach.

In the end, the question isn’t really if you should get credit monitoring; everyone should be working to monitor their credit one way or another. The question is should you pay for it – or can you get it for free?

Can you get free credit monitoring?

There are a few ways to get free credit monitoring, though you might have to mix and match a few of them to get full coverage.

While some services aren’t the same as what a paid credit monitoring service may offer, they can help you achieve the same result: staying on top of the threat of identity theft.

Here are a few ways to do this for free:

  • Initial fraud alert
  • Extended fraud alert
  • Credit freeze
  • Free credit monitoring services
  • Monitoring your credit yourself

Initial fraud alert

An initial fraud alert is typically used when someone’s information has been exposed in a data breach.

It’s an alert you can have put on your credit file to force creditors to go through additional identity verification steps before extending credit. This alert lasts for 90 days.

Extended fraud alert

An extended fraud alert works the same way as an initial fraud alert, but it lasts for seven years.

The FTC has instructions for placing these types of alerts or a credit freeze on your file. Instructions include contacting each of the three nationwide credit reporting companies – Experian, TransUnion, and Equifax – and asking them to place an extended fraud alert on your credit file.

Credit freeze

When you put a credit freeze on your file, you can’t get new credit approved. That’s because a credit freeze completely suspends all creditors from running a credit check. A credit freeze can last as long as you want.

If you want to take out new credit, lift the freeze before you start your application. Then, put it back after you’re approved.

Identity theft victims can do this for free, but others may have to pay a small fee for the service.

Free credit monitoring services

There are many free credit monitoring services, such as Credit Karma and Credit Sesame. But it’s important to note that they don’t all check your credit reports with all three credit reporting agencies.

If you go this route, understand that you may need to do some additional monitoring on your own.

Monitoring your credit yourself

Speaking of monitoring your credit on your own, this is something you can do by checking your credit reports at AnnualCreditReport.com. This site gives you access to your credit reports from all three credit reporting agencies. You can check each one for free annually.

While this won’t give you alerts if someone opens credit in your name the way credit monitoring services would do, it’s a good habit to develop in order to stay on top of your financial security.

Should you pay for credit monitoring?

With all the ways to take advantage of free credit monitoring, does it ever make sense to pay for credit monitoring services?

It all depends on your needs. If you want alerts every time some form of credit is opened in your name or changed on any of your three credit files (one with each credit reporting agency), then you may need to pay for that.

But these services can cost anywhere from $120 to $200 per year, according to Time. So it’s important to think about the cost per year and evaluate your risk of identity theft. Do the two line up?

After all, if you want to prevent new accounts from being opened in your name, a credit freeze is more proactive than credit monitoring. A fraud alert is the next best thing.

But if someone has your credit card number, a credit monitoring service might not catch the purchases the thief makes. Ultimately, you’d have to be reviewing your statements to know.

Another thing to keep in mind is that paying for credit monitoring services may not be worth it if they don’t monitor your credit files from all three credit reporting bureaus. If you’re paying for coverage for only one, you’re not getting as much protection as you could be.

Go with credit monitoring that’s right for you

Before you pay for anything, consider your goals.

Are you looking for alerts when changes come so you can have peace of mind? Credit monitoring services can give you that. Are you looking for ways to prevent identity theft? Perhaps a credit freeze will be more useful.

If you’re worried, you can always do both. But don’t pay for anything unless you understand what you’re getting – and you believe that value is something you need.

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