What Is Credit Monitoring?

Understand the essentials of credit monitoring with our clear guide. Learn how to track your credit score, prevent fraud, and maintain financial health effectively.
Written by Peter Miller
Financial Expert
Managing Editor

Credit monitoring is a modern necessity.

That’s because credit reports are a warning system, a way to quickly spot when you’ve been the victim of identity theft or financial fraud.

In addition, you need monitoring because credit reports can harbor mistakes, errors, and omissions that can cost you big money – and because so much of your financial information is available to so many institutions.

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How Big of a Problem Are Credit Breaches?

The Privacy Rights Clearing House reported 11,611,732,442 records breached since 2005.

With a national population of about 330 million people, it means that, on average, every man, woman, and child has been the victim of 35 data breaches. These breaches can lead to identity theft, outright stealing, and negative credit reports. In practice, it means stolen information can result in the purchase of a big-screen TV in a state you’ve never visited.

A 2013 study by the Federal Trade Commission found that five percent of consumers had errors on one or more of their three major credit reports, which knocked down credit scores by at least 25 points. Lower scores can mean higher costs for mortgages, apartment rentals, auto loans, and insurance.

Add it all together and you have very good reasons to check your credit standing with regularity. To fill this need, there are a number of credit monitoring options, some free and some paid.

What is Credit Monitoring?

Credit monitoring is a financial alarm system. Essentially, credit monitoring establishes a base point in your financial profile and then, when something changes, it notifies you. With quick reporting, consumers then have the ability to contest payments and freeze accounts. In some cases, credit monitoring includes services to fight fraud and abuse on your behalf.

How to Check Your Credit Report

The most basic form of monitoring is a credit report self-check. Under federal rules, you have the right to see a free copy of your credit report from each of the three major credit reporting agencies (CRAs) once every 12 months. To make the process as easy as possible, the federal government created AnnualCreditReport.com where you can access your free reports.

You could simply download your free report from Equifax, Experian, or TransUnion at one time. But it could be strategic to space out your report requests. You might download one report from a different CRA every four months to have an ongoing monitoring system.

Beware, however, of sites that advertise free credit reports. That may not be the case. Only www.annualcreditreport.com provides free credit reports without collecting your personal data or requiring a credit card.

The FCC explains, “Other websites that claim to offer ‘free credit reports,’ ‘free credit scores,’ or ‘free credit monitoring’ are not part of the legally mandated free annual credit report program. In some cases, the ‘free’ product comes with strings attached. For example, some sites sign you up for a supposedly ‘free’ service that converts to one you have to pay for after a trial period. If you don’t cancel during the trial period, you may be unwittingly agreeing to let the company start charging fees to your credit card.

“Some ‘imposter’ sites use terms like ‘free report’ in their names; others have URLs that purposely misspell annualcreditreport.com in the hope that you will mistype the name of the official site. Some of these ‘imposter’ sites direct you to other sites that try to sell you something or collect your personal information.”

How to Handle a Credit Denial

Sometimes, credit-related decisions go against you. In that case, you then have the right to see the credit report that was used and the information that the creditor used to underwrite your application.

“Under federal law,” says the FTC, “you’re entitled to a free report if a company takes adverse action against you, such as denying your application for credit, insurance, or employment, and you ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the credit reporting company.

“You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days, if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft. Otherwise, a credit reporting company may charge you a reasonable amount for another copy of your report within a 12-month period.”

The general rule, of course, is that you should request a free credit report if you receive a denial notice. Review the report with care. Does it contain any factual errors or out-of-date items that impacted your application? If yes, file a complaint with the CRA. Also, contact the lender or other creditors who used the credit report and explain the issue. Your credit application may be reconsidered.

Settlement Claims – Protecting Your Rights

Big companies are often the victims of data breaches on a large scale. Breaches may expose millions of consumer accounts. To resolve potential claims, victim companies often offer free credit monitoring to impacted consumers as part of their compensation.

For example, in 2017, Equifax announced that it experienced a data breach. And that breach divulged the personal information of approximately 147 million people. That breach, in turn, led to a proposed settlement. If approved by a court, account holders receive:

  • Free credit monitoring or $125 cash
  • Other cash payments
  • Free identity restoration services

What other steps can you take?

The National Consumer Law Center recommended that consumers worried about identity theft should not wait to see if Equifax will pay for freezes at the other two credit bureaus. They should freeze their reports immediately. Alternatively, they can place a 90-day “initial fraud alert” in their credit report. This tells businesses to verify identity before issuing credit.

If your data is breached, you may qualify for a claim. Some consumers may be entitled to more compensation than others based on their particular situation. Be sure your claim is consistent with the terms of the settlement agreement. Also, be sure to ask whether accepting a claim means future actions are closed off to you. For details, consult with an attorney or legal clinic.

Online Credit Monitoring Services

A number of online sites have established free credit monitoring programs. Be wary of sites that offer “free” credit monitoring services and then convert them into services for which there is a charge – or sites with terms of service that allow them to collect your data for marketing or to sell to others.

What to Ask a Paid Credit Monitoring Service

Other credit monitoring programs offer various services for a fee. In some cases, it may be possible to qualify for compensation and legal services in the event of a claim. When considering paid services, ask:

  • What monitoring services are you offering?
  • How quickly do alerts go out?
  • If there is identity theft insurance, what are the exact conditions under which claims are paid or services provided?
  • What additional services are you providing (free credit reports, credit scores, etc.)?
  • Can I easily terminate the program?
  • Has the credit monitoring service experienced a data breach?
  • Has the credit monitoring service had disputes with the Federal Trade Commission?
  • What do other consumers say about the program?

Whether you elect to DIY your credit monitoring, use a free service, or pay for monitoring, you need to do something. Billions of breached data records show that our personal information is simply not secure and that we need to protect our valuable financial and personal data.

About Author
Peter Miller
Peter G. Miller is a known expert in real estate and mortgage journalism. His writing includes seven books published by Harper & Row, and he is the creator and host of the AOL Real Estate Center. His expertise appears in online outlets like TheMortgageReports.com, showcasing his deep understanding of the financial landscape. A respected voice in media, Peter has been featured in over 1,000 interviews across TV, radio, and print. His educational background, including degrees in journalism, public relations, and government public information from the American University, solidifies his standing as a trusted authority in real estate and finance.
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