Credit Monitoring

Credit Monitoring, very simply put, is the process of monitoring your credit report for any sort of activity.  Most often this is put in terms of avoiding identity theft by making sure that there has been no fraudulent activity that will end up on your report.  Credit monitoring also involves surveying your credit report to see if there are any outdated or inaccurate items on your credit report that need to be deleted.  As everyone is eligible for at least one free credit report a year, there is no reason to not order a copy and see if everything is in order.

Free Credit Report Monitoring

To obtain a copy of your credit report, you can contact a site like FreeCreditReport.com or AnnualCreditReport.com.  The Fair Credit Reporting Act stipulates that every person is entitled to a free credit report once a year.

There’s an important note to this: you are entitled to a free credit report from each of the major credit bureaus of Experian, Equifax, and TransUnion.  So in effect you will get three different credit reports, all with slightly differing credit ratings and information.  You should not only order a credit report from one bureau, but every bureau individually, as some fraudulent or outdated information may show up on one credit report but not another. 

Spotting Mistakes in Your Credit Report

Credit monitoring is an important way to spot mistakes on your credit report.  There may be a listing for a credit card or bank account that was cancelled long ago.  These issues need to be addressed by erasing inquiries.  This credit management strategy will also help you to avoid surprises when you are trying to qualify for a mortgage, personal loan, business loan or auto loan. 

Avoiding Identity Theft through Credit Monitoring

One of the major reasons you need to consider adding credit monitoring to your personal financial management strategies is to identify identity theft when it happens. Frequent monitoring of your credit report will allow you to quickly spot unauthorized account activity. The sooner you are able to spot identity theft the sooner you will be able to take actions to safe guard your assets.

To do so, you need to sign up for a separate credit monitoring service, which will survey your credit report for any suspicious or fraudulent activity.  Credit monitoring services normally run around $5 to $15 a month, so they have a reasonable cost considering the potential financial loss and headaches associated with identity theft. 

Another important note: the protection you have on individual credit card accounts is insufficient.  As identity thieves can use your identity to apply for loans or new credit cards, any credit card protection plan is not going to cover these issues.  It is not enough to monitor a credit card account, but your credit report, which will monitor all possible activity. 

Keeping Track of Your Credit Score

In addition to helping you prevent fraud and to correct errors, frequent credit monitoring can also be used to help you keep track of your credit score. This can be a beneficial strategy when trying to improve your credit rating or when you are concerned about how certain financial transactions are affecting your credit.  For instance, if you’ve recently been aggressive about cleaning up your credit rating, ordering a credit report is a way to monitor how effective your credit repair strategy has been.