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Should You Buy Credit and Identity Theft Monitoring?

Freezing credit reports and monitoring activity yourself is more effective than buying a credit monitoring service.
Credit Score, Personal Finance
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Think of identity theft protection and credit monitoring services as something like a burglar alarm. They let you know after an intruder has gotten in — but they’re no substitute for a deadbolt.

First, let’s start with what a monitoring service can’t do.

  • It can’t prevent identity theft or credit card fraud
  • It can’t keep you from receiving phishing emails — or from opening them
  • It can’t keep someone from applying for credit in your name
  • It won’t correct errors on your credit report
  • It won’t stop taxpayer identity theft

Instead, credit monitoring is an early warning system that can prevent further damage. For starters, it actually will check your credit scores and reports regularly — something you may mean to do but forget — and will alert you about changes by phone, text or email.

Credit monitoring is an early warning system that could prevent further damage.

It also will flag activity such as applications for credit made using your information, credit limit increases or additions of an authorized user on an account.

An identity theft protection service will offer additional features, such as public record searches, virus protection software, and scans of chat rooms and black market websites for your personal data. Some also will walk you through the steps to take in case of theft and offer up to $1 million to cover the cost of restoring a compromised identity. However, any stolen money typically is covered by zero-liability policies at most financial institutions. And many homeowners and renters policies include identity theft insurance.

Expect to pay $15 to $25 a month for a monitoring service — and more if you choose the highest level of coverage and add family members.

Be your own credit monitor

Credit monitoring is a job you can do yourself if you’re willing to take the time.

Many credit cards and personal finance websites offer free credit scores. Look for one, such as NerdWallet, that also offers free credit report information so you can watch for fluctuations in your score and report. Sign up for such a service before placing freezes on your credit files; otherwise, the freeze will block the sign-up process. 

Also, check the detailed information on your credit reports. Federal law requires each of the three major credit reporting agencies — Equifax, Experian and TransUnion — to give you a free credit report every 12 months, and more often in some cases. You must dispute any errors you find.

»MORE: Defend your credit by checking your credit reports

Be your own identity theft monitor

You can protect your identity on your own as well, and more effectively than a monitoring service.

Chi Chi Wu, an attorney with the National Consumer Law Center, says monitoring is “at best a second-tier solution” for identity theft. Many experts consider a credit freeze superior to any monitoring service for the purposes of preventing fraud.

Many experts consider a credit freeze superior to any monitoring service for the purposes of preventing fraud.

Make sure you freeze your credit with all three credit bureaus. Many states allow credit bureaus to charge for credit freezes; the fee usually is $20 or less. Some bureaus also charge to temporarily thaw your credit.

A less drastic alternative is a fraud alert. It won’t keep you — or someone else — from being able to apply for credit in your name, but it’s likely to slow down approval because the process requires extra verification to prove that it was really you who applied for credit. A fraud alert lasts for 90 days and is renewable. If you have been a victim of fraud, you can get an alert placed for seven years.

Another simple way of making things harder for would-be fraudsters is to reduce the number of preapproved credit offers you get in the mail. The Fair Credit Reporting Act gives you the right to opt out of receiving such offers. Visit to do it.

To detect medical identity theft, subscribe to any available email alerts for when your health insurance pays a claim, so you can make sure it’s legitimate.

»MORE: The difference between fraud alerts and credit freezes

When identity theft monitoring is free

If you’ve been a victim of a data breach, you probably have been offered a year of free identity theft monitoring.

Before you accept the free service, read the fine print. Understand when the free service ends and how to cancel it so you don’t get charged after that. Be wary of arbitration clauses that require you to waive your right to sue over the data breach.

Don’t let monitoring lull you into complacency, though, thinking that you can be less vigilant because someone else is watching your credit.

For example, the free service you’re offered might include monitoring from just one of the three major agencies and that, too, only for one year. Hackers can use your stolen information to apply for credit after the free service has expired or at businesses that check your credit at another bureau.

If you decide to pay for a monitoring service

Maybe you know you won’t follow through on do-it-yourself monitoring or are willing to pay for extra protection. If so, look for an identity theft protection product that offers both credit monitoring and a full suite of theft alerts. The cost makes sense if:

  • You’re already the victim of identity theft or at high risk of it, for instance, if your Social Security number already has been disclosed in a data breach or you’ve lost your Social Security card
  • You don’t want to freeze your credit reports
  • You know that you won’t go through the effort of actively monitoring or freezing your credit

Look for a service that covers all three credit bureaus, not just one — otherwise, you’d be paying for partial coverage only.

NerdWallet recommends avoiding such offerings from credit bureaus. They may not offer much identity theft coverage and may have an arbitration clause limiting your rights if the bureau is the source of your data breach.

Updated Oct. 31, 2017.

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