Woman doing a credit card transaction.

Credit Monitoring: Definition And Services Compared

Dan Rafter5-minute read
October 13, 2020

Your three-digit credit score is an important number, especially if you want to apply for a credit card, buy a home or finance a new car.

Lenders look at this number to determine how well you’ve managed your credit and paid your bills. A low credit score means you’ll struggle to qualify for credit or loans. A high score not only increases your odds of qualifying for mortgages, auto loans and credit cards, but also boosts your chances of nabbing a lower interest rate when you do borrow.

One way to maintain a healthy credit score is to enroll in a credit monitoring service. These services can help you discover if a scammer is making unauthorized purchases on your credit card accounts or if an identity thief has applied for credit cards or loans in your name. By catching this illegal activity quickly, you can lessen the damage cybercriminals can do to your finances and credit score.

It’s important to know, though, that credit monitoring services won’t stop fraud from happening; they only alert you when you might be a victim. Not all credit monitoring services offer the same features, either.

Here is a look at what credit monitoring services can and can’t do, and some guidelines for choosing the right service.

What Is Credit Monitoring?

You have three credit reports, one each maintained by the national credit bureaus of Experian™, Equifax® and TransUnion®. Each of these reports lists your open credit card and loan accounts, how much you owe on these accounts and whether you’ve made any late payments or missed payments in the last 7 years.

Credit monitoring services study these reports looking for any major changes, and then alerts you if they discover one.

How Are Credit Monitoring Services Helpful?

A credit monitoring service will watch your credit reports for several possible signs of fraud.

They Keep An Eye On Your Credit Reports

Say a new credit card account shows up on your credit reports. Your credit monitoring service will alert you. If a new mortgage or auto loan pops up on your reports, the service will again alert you.

If you applied for a qualified for these accounts or loans, no problem. But if you didn’t apply for a mortgage and one shows up on your credit reports, Ttat’s the sign that someone has stolen your identity and has applied for a loan in your name.

Credit Monitoring Services Watch for Fraudulent Activity

If your monitoring service alerts you to suspicious activity on your credit card accounts or bank accounts, you can contact the credit bureaus and the bank or lender that issued the loan or fraudulent credit card account and report that you might be the victim of identity theft.

That’s the goal of a credit monitoring service: to alert you when someone is possibly stealing your information or accessing your credit accounts.

Credit monitoring services will also alert you when a bank or lender checks your credit scores or reports. This is known as a hard inquiry, and happens when you – or someone posing as you – applies for a credit card or loan.

Services will also alert you when your address on your credit report changes or if your name on your credit reports changes. Services will send you notices – either by email, phone or text – when payments are made on your accounts or loan balances.

You can monitor all of these alerts to make sure they are legitimate payments or changes made by you and not by a cybercriminal.

They Scan The Dark Web

Finally, credit monitoring services will also scour the dark web – a section of the internet that most people never access and that is home to many criminals selling stolen personal and financial information – to make sure your passwords, address, name or Social Security number can’t be found in this often seedy arena.

If you are alerted that your information is on the dark web and might be being sold, you can take action such as changing your passwords, alerting your banks or lenders that your information might have been compromised or canceling credit card accounts that hackers might have accessed.

Are Credit Monitoring Services Free?

You can choose from free credit monitoring services or those that charge monthly or annual fees. The idea of a free service might sound tempting, but free sites might not provide the same level of protection.

If you do want to sign up for a paid credit monitoring service, be sure to research the following:

  • What is the monthly or annual cost of the service?

  • Does the service monitor the credit reports of all three national credit bureaus?

  • Does the service include identity theft insurance?

  • Does it offer additional features such as scanning the dark web?

What Can’t Credit Monitoring Services Do?

A credit monitoring service will alert you of activity on your credit reports. But it won’t prevent identity theft and it can’t stop criminals from draining your bank accounts or running up charges on your credit cards.

That’s because a monitoring service only looks for suspicious activity. It doesn’t prevent that activity from happening.

This doesn’t mean that credit monitoring isn’t important. You want to know as soon as possible if someone has opened a credit card account in your name or if someone has used your personal information to apply for a loan.

Should I Buy A Credit Monitoring Service?

Is credit monitoring worth paying for? That depends.

You can monitor your credit by yourself, for free. This requires you to regularly check your credit card account statements for suspicious purchases or activity. Fortunately, doing this is easy today. You can check your statements daily through your credit card’s online portal.

You can also order one free copy of each of your three credit reports once a year from AnnualCreditReport.com. And because of the COVID-19 pandemic, you can order these reports once a week if you’d like through April of 2021. This gives you the chance to monitor suspicious activity on your own. Your reports will list all credit card accounts and loans in your name. If you see a credit card account that you’ve never applied for? That’s a sign of identity fraud.

But if you don’t have the time or desire to monitor your credit on your own, you might consider signing up for a credit monitoring service that will alert you when something suspicious pops up on your credit reports.

The Bottom Line

A credit-monitoring service can help you quickly identify fraudulent activity on your credit reports. This is important: Fraudsters who gain access to your credit card accounts or personal and financial information can drain your bank accounts, apply for loans in your name or run up purchases on your credit cards. A credit-monitoring service can help protect you from these financial disasters.

Interested in protecting your credit? Check out the features of Rocket HomesSM credit-monitoring services. And if you want to learn more about how credit and credit scores work, visit our credit learning center.

Dan Rafter

Dan Rafter has been writing about personal finance for more than 15 years. He's written for publications ranging from the Chicago Tribune and Washington Post to Wise Bread, RocketMortgage.com and RocketHQ.com.