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Why Credit Monitoring Services From Credit Bureaus Fall Short

Key drawbacks, including cost and restrictive terms, mean it's better to freeze your credit and do your own monitoring.
Jan. 30, 2019
Credit Score, Personal Finance
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As reports of data breaches become practically routine, it’s hard not to feel vulnerable. All three credit bureaus suggest their own credit monitoring services as the route to peace of mind. But monitoring your credit is not the same as protecting it.

Alerts and monitoring are like a security camera or burglar alarm: They don’t necessarily keep criminals out; they just make it easier to catch them before much damage is done.

That’s why NerdWallet advises you to freeze your credit at all three bureaus — Equifax, Experian and TransUnion — to keep the bad guys out in the first place and to do your own monitoring rather than paying a bureau to do it.

Here’s what to know about credit monitoring services from credit bureaus and identity theft protection companies, and why we recommend a different route.

What credit monitoring services do

Monitoring

This service typically includes alerts when a credit application has been made in your name, such as opening a new account or adding an authorized user, and when your credit score changes. Other offerings may include alerts about large transactions, credit limit increases and changes to personal information such as your address. Identity theft monitoring often includes checking whether your Social Security number is found on websites known to be risky (the “dark web”).

You need a service that watches your files at all three credit bureaus, not just one.

You need a service that watches your files at all three major credit bureaus, not just one. Otherwise, it’s like locking one door and leaving two open.

Recovery

Unwinding the damage when someone hijacks your credit can involve as little as reporting the fraud to a credit issuer and getting a new card or as much as following all the steps outlined at IdentityTheft.gov and filing a police report. Some monitoring plans offer help with those tasks. Plans often include identity theft insurance, which can help cover lost wages, legal costs and more, as long as you report the theft in a timely manner and follow instructions.

Extras

Some credit monitoring services give you access to your credit scores. In addition, all three bureaus offer a “credit lock” as part of their monitoring services. A lock is like a freeze but it may be easier to suspend when you do want to grant access to your file.

»MORE: Guide to identity theft and cybersecurity

The downsides

No right to sue

Credit bureau monitoring plans typically have an arbitration clause in their terms of service. When you sign up, you must waive your right to a class-action lawsuit and agree to use binding arbitration, which widely is considered to be against a consumer’s best interests.

A credit reporting bureau could fail you in two ways: by not providing adequate monitoring and by failing to safeguard the consumer information it collects on you.

The inability to sue is particularly bad in case of a breach because a credit reporting bureau could fail you in two ways: by not providing adequate monitoring and by failing to safeguard the consumer information it collects on you. That’s something to consider in light of the Equifax breach that exposed the personal data of 145 million consumers in 2017.

Equifax removed the arbitration clause from the TrustedID monitoring product that it offered to consumers for free for one year after that breach. However, as of Jan. 31, 2019, it transitioned consumers to a second free year from Experian’s IDnotify, unless they opted out. That service, which applies only to Experian credit reports, does have an arbitration clause and class-action waiver.

Ongoing fee

In addition, monitoring typically involves an ongoing fee. In contrast, placing and lifting freezes is free. It’s also free to place a fraud alert, which notifies you if someone applies for credit in your name (that’s one of the services of identity monitoring).

Overview of credit/identity monitoring services

Company, cost Sample services
Experian IdentityWorks Premium
$19.99 a month or $199 a year
  • 3-bureau credit monitoring
  • Quarterly 3-bureau credit reports and FICO scores
  • Experian credit lock
  • ID theft monitoring, including Social Security number scanning
  • $1 million ID theft insurance
TransUnion Credit Monitoring
$24.95 a month
  • 3-bureau credit monitoring
  • TransUnion report and VantageScore 3.0
  • TransUnion and Equifax credit lock
  • Personalized credit and debt analysis
  • $1 million ID theft insurance
Equifax Complete Premier
$19.95 a month
  • 3-bureau credit monitoring
  • Equifax credit report
  • Social Security number scanning
  • Equifax credit lock
  • $1 million ID theft insurance

Our advice

Using a bureau for credit monitoring comes with significant drawbacks, so we recommend avoiding them. Instead, you can get good protection at lower cost by doing it yourself.

  • Watch for changes in your credit scores and reports on your own. You can access and monitor free credit score and report information from some personal finance websites, including NerdWallet. In addition, you’re entitled to free credit reports every 12 months direct from the bureaus via AnnualCreditReport.com.
  • Place credit freezes yourself, for free. (Note: Equifax reports that were locked via its TrustedID product were to be automatically unlocked once the free monitoring year ended, leaving them vulnerable unless consumers relock or freeze them.)
  • Your credit card issuers and financial institutions may let you set transaction alerts for free.
  • You can use services offered by some credit cards, which are stepping up to offer identity theft alerts.

If you decide to pay for a monitoring service, consider an identity theft protection plan that’s not tied to a credit bureau. That preserves your ability to join a class-action suit if a credit bureau fails to protect you.

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