What Is Credit Monitoring, and How Does It Work?

Good credit allows you access to various financial products at lower interest rates. It makes you eligible for loans, credit card deals, and insurance policies, among other perks at favorable terms. 

However, your creditworthiness depends on how well you track your credit activity. In some cases, an identity thief might breach your personal information and financial data for malicious purposes. They might use this data to take out loans in your name, access your bank account, open new credit accounts, sign up for utility services, or access your credit card portal. Here’s where credit monitoring service comes in. 

Enlisting credit monitoring services can make a difference in protecting you from identity theft and financial fraud and maintaining your credit score. It can also help you see what contributes to your credit score, such as payment history and credit usage, protecting you from identity fraud. This guide explains everything about credit monitoring and why it is essential.

What Is Credit Monitoring?

Credit monitoring is a service that tracks your credit activity to detect changes in your credit report. These might be changes to your personal data, new credit lines, credit score changes, unusual buying patterns, and unauthorized transactions, among other suspicious activities. The primary objective of credit report monitoring is to prevent identity theft and notify you of potential fraud.

With nearly every aspect of life going digital, your financial security and credit history will always be at risk. Someone might breach your financial and personal data and use it for criminal purposes. For instance, they may apply for a new credit account or take out a loan without your consent, damaging your credit history. Failure to monitor your credit activity can damage your creditworthiness, making you ineligible for various financial products.

A credit monitoring service helps protect your credit against identity fraud. It ensures your credit reports are accurate and devoid of discrepancies and fraudulent transactions. Moreover, it keeps your credit files locked, making a difference in maintaining your credit score.

While you can track your credit reports independently, investing in credit monitoring services offers good value for money. Credit monitoring services use advanced tools for identity theft protection and dark web monitoring and send alerts when they detect changes in your credit report.

How Does Credit Monitoring Work?

Credit monitoring safeguards your personal and financial information from identity theft. The service tracks your credit score and credit reports obtained from TransUnion, Experian, and Equifax, the three national credit reporting bureaus mandated to maintain a consumer’s credit report. 

Each agency has a separate credit report highlighting an individual’s credit activity. The reporting agencies receive data from banks, credit card issuers, and other financial institutions regarding your credit activity. 

The credit report has a significant amount of financial information and personal data, such as your name, Social Security Number, current address, and phone number. Other critical pieces of information that credit monitoring tracks in your credit report include: 

• Past and Present Accounts: Your credit report includes details of open credit accounts. It covers credit card accounts, lines of credit, loans, and mortgages. The report details when you opened the accounts and how much you owe. Credit report monitoring will send you alerts in case of changes to these accounts.
• Public Financial Records: Your reports show public financial records such as home foreclosures, tax liens, and bankruptcy filings. Chapter 7 filings remain on your credit report for ten years, while Chapter 13 filings remain for seven years. 
• Credit Inquiries: When you apply for a credit card, mortgage, or loan, the lender will conduct a hard inquiry to determine your creditworthiness. The lending institution will review your report to decide your eligibility for a loan. Hard inquiries remain in your credit report, albeit briefly, and impact your credit score.
• Late and Missed Payments: Your credit report highlights missed or late payments. If you are a victim of identity fraud, your credit report might contain missed payment if the identity thief takes out a loan in your name and fails to repay. These missed payments on your loan accounts remain on your credit reports for seven years.
• Collections: Aside from missed or late payments, your credit reports show information about your loan accounts sent to debt collection agencies. Lenders usually enlist collection companies to help recover delinquent loans. Credit monitoring can help detect new loan accounts, protecting you from collection agencies

Why Do We Need Credit Monitoring

Credit monitoring is a manual or automated process of keeping tabs on any changes made to your credit report with either of the three big credit reporting agencies (Equifax, TransUnion, Experian). The purpose of credit monitoring is to avoid fraud due to identity theft.

With so many data breaches over the past decade (Capital One, Equifax, Home Depot, Discover, Experian, etc.), your information is most likely out there, and identity theft is a real concern. Credit monitoring is one way Americans protect their credit report and credit scores from identity thieves.

More than 43% of identity fraud cases were discovered through credit monitoring.

Who Needs Credit Monitoring?

Credit monitoring is for everyone, from individuals to businesses. Anyone can be a victim of identity theft and credit fraud, with identity theft posing severe challenges for consumers and businesses. Even with more advanced online security, hackers and criminals are devising new tricks to access personal information and financial data.

Sometimes, the threat does not come from far. Family members, close friends, or caregivers might breach your data and use it to impersonate you in various financial dealings. They may take over your accounts, leaving you stranded. You may be a good candidate for credit monitoring if you don’t have the time to monitor your credit reports but want to secure your finances. 

Without credit monitoring, your credit rating and financial security might be at risk. An identity thief might steal and use your data for financial gain, destroying your credit score. A low credit rating might impact your ability to get a loan, open a new credit line, or lease a car. You won’t have access to various financial products.

You can avoid these problems by enlisting a credit monitoring company for assistance. The provider will track your credit reports and send you prompt credit monitoring alerts via text or email whenever there are changes to your credit information. This coverage can benefit anyone who cares about their financial security.

Benefits of Credit Monitoring

While credit monitoring is not a free service, it is relatively affordable. It has numerous benefits, making it worth it, as not having this coverage can lead to significant financial losses. The last thing you want is to discover fraudulent transactions in your account when it is already too late to be salvaged. With that said, here are the top benefits of credit monitoring:

Early Detection of Identity Theft

The FTC receives millions of identity theft complaints yearly. Identity theft is a crime that ensues when one impersonates you or uses your information for malicious purposes. The ID thief may impersonate you and use your data to open new credit lines, steal money from your bank account, apply for loans, sign up for subscription services, or take over your accounts. These unauthorized transactions can dent your credit score, leaving you financially unstable. 

Enlisting credit monitoring services can make a difference in detecting identity theft and credit fraud. The credit monitoring company can catch the fraudster quickly before they damage your credit rating. You will receive credit monitoring alerts whenever there are changes in your credit activity. If you notice any discrepancies or fraudulent transactions in your report, you can dispute them early before they destroy or lower your credit score.

Real-Time Alerts

Credit monitoring offers more than just tracking your credit activities. You are eligible for free credit monitoring alerts from the service provider. The credit monitoring company will notify you of any changes whenever a new activity appears in your credit report. 

Credit monitoring alerts include notifications of new accounts, loans, credit inquiries, liens, and bankruptcy filings. You will also receive alerts for credit reports and credit score updates for better financial management.

These notifications are in real-time. They allow you to act with a better sense of urgency whenever you notice discrepancies or suspicious activities in your credit accounts. You may receive credit monitoring alerts via text or email.

There are a lot of options available when it comes to credit monitoring, and services offered will vary depending on who you sign up with. The basic idea of credit monitoring is that you are alerted within 24-hours if a change occurs on your credit report. Some of these changes could indicate fraud or identity theft. A sampling of the changes that you will be alerted about are:

• New Accounts

If a new loan, credit card account, or other financial vehicle shows up on your credit report, you will receive an alert via text, email, phone, or mail, depending on the preference you chose.

• Hard Inquiries

Whenever you or someone pretending to be you applies for credit, and the lender requests a copy of your credit report, this is called a hard inquiry, and you will be notified about those as well.

• Changes to Your Existing Accounts

If the balance on one of your accounts goes over the credit limit, you will be notified. If you pay off a credit card and your credit score changes, you will also be notified of this. Any changes to existing accounts are flagged for notification.

• Public Court Record Filings 

If you file for bankruptcy, are slapped with a tax lien or civil court judgment, those will also show up on your credit report, and you will get a notification about those too. 

• Home Address Change 

If the home address associated with one of your loans or credit cards change, you will receive a notification. An address change could be associated with fraud.

Credit Report Monitoring

Your credit report contains critical information that highlights your creditworthiness. It shows your payment history, credit utilization, open accounts, and credit inquiries. These dynamics impact your credit score. They determine if you qualify for loans, mortgages, and other financial products.

Credit reporting can be inaccurate since TransUnion, Experian, and Equifax rely on banks and other financial institutions for data. Some entities might submit incorrect information, leading to discrepancies and errors in your credit report.

Credit report monitoring can help unearth these issues. This service monitors your credit report and sends you alerts whenever there are changes to your data. You can use these alerts to dispute errors and inaccuracies with the reporting agencies before they affect your credit score.

Receiving Transaction Alerts

Credit monitoring alerts also include transaction notifications. Credit reports do not show purchase transactions, checking account balances, and savings. However, they display credit card transactions as part of credit utilization. The card issuer won’t report each purchase you transact with your credit card to the credit bureau. Instead, they will report your outstanding balance and minimum payments to your accounts.

Transaction alerts can help you track your credit card utilization. If you notice any fraudulent or authorized transactions, you can report them to the relevant authorities for the necessary action. You can also dispute these transactions with the reporting agencies to protect your credit rating and limit the damage.

Credit Score Protection

Lenders usually check your credit score to determine your creditworthiness. This information helps them decide whether to approve or reject your loan application. A high credit score ensures access to financial products at lower interest rates.

Identity theft and fraud can adversely impact your credit score, reducing your chances of accessing credit. While repairing a damaged credit score is possible, restoring your credit report might take time.

You can avoid these issues with efficient credit monitoring services. Credit report monitoring closely tracks your credit activity and notifies you in case of changes, helping protect your credit score. It allows access to current credit reports and credit score updates so you can know what contributes to your credit report and how to improve your credit score.

Locking and Unlocking Credit File

Building a good credit rating takes time. Without credit monitoring, an identity thief can tarnish your credit score in no time. Their fraudulent activities can impact your credit report significantly. 

Credit report monitoring can help lock your credit file if you suspect you are a victim of identity theft. Freezing your credit file prevents criminals from taking out loans and opening credit accounts in your name. It doesn’t affect your credit score since it is an anti-fraud measure. 

After resolving your credit report issues, you can unlock or unfreeze your credit file through the three reporting agencies. Credit monitoring can help determine the appropriate time to unfree your credit file.

How to Set Up Credit Monitoring

You are entitled to a free copy of your credit report with all three of the credit reporting agencies each year. However, unless you stagger those requests, you will have to pay for additional copies throughout the year. You can certainly get copies and monitor your credit that way, but there is also another way that is more efficient and more useful.

Sign up for credit monitoring with a solid, trusted company like IDStrong and take the hassle off your plate. By letting them continuously monitor your credit, you’ll get up-to-date reports all the time. You won’t have to remember to order your new credit reports each year; you’ll have access to them all the time. As an added bonus, their team of experts will also help you repair your identity if you are a victim of identity theft or fraud. They will troll the dark web to search for your information and let you know if a data breach has resulted in your personal details ending up for sale. 

Credit monitoring packages include a lot of valuable services that you would not be able to handle yourself. Credit monitoring makes sense to keep your identity safe. Some of the features of IDStrong.com’s service are:

• Fraud detection.

• Credit monitoring.

• Protection by a $1,000,000 insurance policy.

• Privacy protection tools.

• Lost Wallet Assistance.

• Public records monitoring.

• Social media record monitoring.

• Chat room monitoring.

• Dark web monitoring.

• Personal specialists to help you with identity theft.

With a credit monitoring service, you can also see your credit score at any time. If you are working hard to improve your credit score, this service is invaluable. 

What Credit Monitoring Doesn’t Cover

Credit monitoring tracks your credit activity and sends alerts based on changes to your account. It does not stop a criminal from opening new credit accounts or taking out loans in your name. It is up to the consumer to act upon the credit monitoring alerts. 

While credit monitoring shows inaccuracies and discrepancies in your report, it does not correct these errors. You may have to contact the reporting agencies to dispute emerging issues.

Another limitation is that credit monitoring does not report issues on your behalf. You may have to call the police or relevant agencies to deal with identity theft and financial fraud. Some credit monitoring providers might guide you in resolving identity theft issues.

While credit monitoring has a few limitations, it is worth investing in since it alerts you of suspicious credit activities in real-time so you can take action. It can help protect your creditworthiness and safeguard your finances from identity thieves and online criminals.

How To Keep Your Identity and Credit Report Safe

Credit monitoring is an effective preventive measure against identity theft and online fraud. The service monitors your credit activities and sends you alerts whenever there are changes in your credit report. 

These days you cannot be too careful when safeguarding your identity. Some other ways you keep your credit report and identity safe are:

• Consider placing a fraud alert on your credit report if you have been a victim of identity theft in the past. A fraud alert tells creditors that they need to be extra careful verifying your identity when you apply for new loans.

• Request a credit freeze if you want to prevent anyone from opening new accounts in your name.

• Ask about a credit lock where you can instantly lock and unlock your credit report from a mobile app.

• Be watchful for phishing or other suspicious emails.

• Never click on links or download attachments inside an email.

• Do not share your personal information with anyone unless absolutely necessary.

• Keep all your devices updated with the latest software patches and antivirus software.

• Never share passwords and do not use them on multiple sites.

Use common sense and watch out for anything that sounds too good to be true; it probably is not true. Your identity is too important to take any chances.

IDStrong is here for all your credit monitoring needs. We constantly track your credit activity and promptly notify you of any account changes. Schedule a meeting with our agents to learn more about our services.