Great Article from KELLY DILWORTH about when to pay for credit protection and monitoring services:
Credit monitoring keeps a watchful eye on your credit report, but is it worth paying for?
Credit scoring firms, credit bureaus and a slew of other security and identity technology companies offer credit and identity theft monitoring packages for a monthly fee. They can cost anywhere from $15 to $30 per month, and many provide your credit score and send you alerts when your credit report changes.
Several of the credit and identity theft monitoring packages scour the internet to ensure your personal information isn’t being used improperly. Some even insure you for up to $1 million for notary and legal fees, lost wages and other costs if your identity is stolen while you’re using the service.
However, you don’t have to pay a monthly fee to stay on top of your credit report. You can sign up for free credit monitoring at CreditCards.com, Mint and other services. Additionally, each of the three major credit bureaus — Equifax, Experian and TransUnion — is required by law to provide you with one free credit report each year at annualcreditreport.com. And many credit cards allow you to check your FICO score or VantageScore when you manage your account online.
Some consumers view paid credit monitoring packages as a bad investment, while others swear by them. Experts’ opinions also differ, but there are some instances in which paying for credit and identity theft monitoring can provide a valuable extra layer of protection.
Here is how to tell whether you need credit monitoring or not.
When to pay: You’re buying a house, or your name is Mary Smith
If you’re buying a new home and plan to apply for a mortgage, you’ll want to keep your credit score in its best possible shape. The higher your credit score, the more favorable your interest rate will be when securing your home loan. That’s why lenders and realtors advise homebuyers not to open new lines of credit – which trigger hard inquiries and could indicate an overreliance on credit — during the mortgage application process.
Monthly credit monitoring can be helpful during the homebuying process, particularly when you’re in the final stages of securing a loan. It typically takes about a month to get approved for a mortgage after you apply, and a fraudulent credit inquiry could slow down the process.
“If you’re in the market to buy a home in the next year, it’s definitely more reasonable to be monitoring more often,” said Amy Clark, a consumer lawyer based in Austin, Texas.
Clark said consumers may also consider monthly monitoring if their credit files have been erroneously mixed with those of other people by credit bureaus. “Mixed credit file” issues could be a recurring problem if you have a common name, or if you have the same name and address as a family member.
“If they’ve mixed you up in the past, then it makes sense to monitor because that kind of thing often happens again,” she said.
But even continuous monitoring has its limitations. Susan Grant, director of consumer protection and privacy at the Consumer Federation of America (CFA), noted it’s still troublesome to resolve an identity theft or mixed credit file issue, even if you get a timely warning.
“It’s not easy to resolve those problems when you discover them,” Grant said. “Subscribing to a service isn’t necessarily going to guarantee that it will get resolved by the time you need it to be.”
Life-saver, or waste of money?
Some consumers see little value in paying a company to watch their credit. Ramon Khan, a marketing professional in Houston, said he purchased a credit monitoring package as a teenager soon after his father’s identity was stolen. However, he ultimately felt it was a “waste of money.”
“I stopped using it because I didn’t feel like it was necessary, knowing that I could get a free credit report periodically,” Khan said.
Khan also discovered the free app Mint, which he now uses to track his credit report for any suspicious inquiries. Meanwhile, Khan said he’s skeptical that an identity theft protection service can help him in a time of need.
“I prefer to use free services, keep an eye on my inquiries and take quick action myself if see something out of the ordinary,” he said.
For others, credit monitoring is a godsend.
Maria Moser, an entrepreneur from Maryland, signed up for FICO’s service in 2006 when she and her husband were in the market for a new house. It spared them a lot of stress a few years later, when they discovered a thief had opened two credit accounts in Moser’s husband’s name and was using a store card account the couple owned.
“We were able to put a stop to it within a day or two,” Moser said. “(My husband) was able to initiate security freezes on all three accounts.”
Moser said she and her husband would have been completely unaware of the identity theft for several weeks without instant email notifications that came from their credit monitoring service. The couple has continued to pay for the package even though its cost has risen over the years.
“I would still say it’s worth it because if we had tried to untangle that mess by ourselves after several weeks, we would have had to ask for help,” Moser said. “It probably would have affected our credit long term.”
Other options if you don’t want to pay
There are ways to keep an eye on your credit for free. Many credit monitoring services offer 30-day free trials. You can sign up for one and cancel it after the first month. After that, you can stagger free credit reports from the three major bureaus so that you get a new one every four months.
If you have a credit card, there’s a good chance you can check your FICO score or VantageScore every month just by logging into your online account. Under a program introduced by FICO in 2013, more than 200 million consumers have free access to their credit scores on a regular basis.
Additionally, you can place a fraud alert on your credit report through one of the credit bureaus. A fraud alert lasts 90 days and can be renewed for free either manually or automatically. It prevents any new credit accounts from being opened without your permission. Placing a fraud alert on your credit files also allows you to get a free copy of your credit report that doesn’t count as the one you’re entitled to by law each year.
You are also allowed to obtain an additional free copy of your credit report if your identity has been stolen. In some states, an identity theft victim can initiate a security freeze — typically a paid service that bars anyone from accessing your credit report — at no charge. And CFA’s Grant noted that many companies affected by data breaches offer their employees and customers complimentary credit monitoring and identity theft services for a limited time.
Evaluate your financial needs and goals
With so many resources available today, you can get a precise picture of where your credit stands at just about any given moment. Paid credit monitoring can be helpful in certain circumstances, but it’s not for everyone. If you believe your personal information could be at risk, or if you want to secure a large loan with no headaches, it may be worth the investment.
“Whether a consumer chooses to pay for — or subscribe to — a credit monitoring service is unique to the specific needs of that consumer and what credit-based or financial goals they have set for themselves,” said Equifax spokeswoman Nancy Bistritz-Balkan.
Pros and cons of credit monitoring
Pros:
- Notifies you of credit report changes, including hard inquiries, within 24 hours.
- Allows you to check your credit score at any time.
- Many provide access to your credit reports from all three major credit bureaus.
- Some services scan the internet to ensure your personal information isn’t being misused.
- Some insure you against any identity theft that occurs while you’re using the service.
- Some provide digital security products such as anti-virus software.
Cons:
- May not alert you to fraudulent activities that don’t involve credit (i.e., utility and cellphone accounts opened in your name, tax fraud).
- Some only monitor your credit report from one bureau, while charging extra to check all three.
- Often provides credit scores that are “educational,” and not the same as those used by lenders.
- Can’t prevent identity theft altogether.
http://www.bankrate.com/personal-finance/credit/credit-monitoring-when-is-it-worth-paying-for/