Is Credit Monitoring Right For You?

There are pros and cons of paying for the service.

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Most consumers today are very much aware of the importance of maintaining a good credit history. The information reported on your credit report may determine whether or not you are approved for credit and if so, if the terms will be affordable.

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What happens when the information appearing on your credit report is inaccurate? While there are several ways to dispute records that are incorrect, you must first be able to spot these errors and act on them. In the case of identity theft or fraud, it may be months before you notice inaccurate information and by that time, the damage will likely be done. This is where credit monitoring services come into play.

What Are Credit Monitoring Services?

In today's busy world, many consumers are willing to pay an outside company to provide services which the consumer may not have the time or ability to perform. Credit monitoring services are available for a fee, and provide for consumers an ever watchful eye on their credit history to spot suspicious activity.

Once the fee for this service is paid, the credit monitoring company takes over and begins constantly reviewing your credit activity and history. They are on the lookout for fraudulent activity and instances which may indicate identity theft or other changes in your credit activity that seem out-of-place.

How Does Credit Monitoring Work?

Each credit monitoring service is different, however the concept remains the same across the industry. Most credit monitoring systems will review information reported to all three existing credit bureaus and notify you when they spot inconsistencies in your credit activity. Since suspicious activity may represent fraud or identity theft, the credit monitoring service notifies you within 24 hours (or sooner) to limit the amount of damage that may occur when your personal information falls into the wrong hands.

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Is Credit Monitoring Worth the Cost?

There are two schools of thought regarding the cost effectiveness of credit monitoring services. Many consider the cost to be too expensive for a service that most people could perform themselves. Credit card companies have entire departments set up to spot and reduce fraud and there are other safeguards that can be put in place to reduce your risk of identity theft.

Consumers can choose to take a more active role in reviewing their credit report and other activity reported in monthly statements. On the other hand, if a credit monitoring service detects activity which would otherwise have gone undetected, the service has paid for itself by saving the consumer hundreds if not thousands of dollars that may be lost in the case of identity theft. It is important to remember that identity theft is not just harmful to your finances but many other aspects of life. It can take years for a victim of identity theft to recover both financially and emotionally.

It is up to each individual to determine how much they are willing to pay for peace of mind. If you are unable or unwilling to put forth the effort to actively monitor your own credit activity, these services can be quite cost effective. Conversely, those who are willing to do the legwork required to remain vigilant against fraud and identity theft can save themselves hundreds of dollars in fees for a service they can provide to themselves.

Pinyo is the owner of Moolanomy Personal Finance Blog, which covers a wide range of personal finance  and investing topics, with features that include reviews, comparison guides, and Q&A sections.