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Should You Pay for a Credit Monitoring Service to Protect Yourself?

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In 2017, credit bureau Equifax announced hackers had broken into its servers and gained access to the personal information of over 140 million people, putting them at risk of identity theft. In the wake of the attack, Equifax offered all U.S. victims a free year of credit monitoring through its new TrustedID Premier service. At the same time, Google searches showed a surge of interest in other paid credit monitoring and identity protection services. These services comforted panicked consumers with the promise of catching signs of identity theft right away – or even stopping it before it happened.

However, some financial experts argue paid credit monitoring is a waste of money. They say that, at best, these services do nothing you can’t do on your own for less or even free. At worst, they lull you into a false sense of security, leading you to neglect other measures that offer much more protection.

The reality lies somewhere in between. Paid credit monitoring and identity protection services do offer some valuable benefits, but they often come at a high cost. And the protection they provide isn’t always as strong as other – sometimes much cheaper – available measures. Before paying for a credit monitoring service like Identity Guard, weigh the pros and cons to decide whether it’s worth it to you.

Pros of Credit Monitoring Services

Paid credit monitoring services offer a range of benefits, which vary by provider. Some services only track your credit report and credit score. Others take stronger steps to protect you from identity theft, such as monitoring sales of your Social Security number on the dark web.

These more sophisticated services often call themselves “identity theft protection services” rather than credit monitoring services. However, there’s no clear distinction between the two. Either type can provide some or all of the following benefits.

1. They Actively Monitor Your Credit Report

The primary purpose of credit monitoring services is to check your credit report daily. If any suspicious changes pop up, such as a new account in your name, they send you an alert. Some services also guide you through the steps needed to dispute an error with the credit bureau, though they can’t do it for you.

2. They Track Your Credit Score

Credit monitoring services also give you access to your credit score at any time. However, there are lots of ways to check your credit score for free. So that alone isn’t a good reason to use a credit monitoring service.

3. They Monitor Your Identity

Some services monitor black-market sites that deal in stolen Social Security numbers. If your number pops up on one of these sites, they alert you.

4. They Allow You to Lock & Unlock Your Credit

The three major credit bureaus – Equifax, Experian, and TransUnion – all offer credit monitoring services with a special feature: They let you lock your credit report with the swipe of a finger. This prevents anyone from pulling your credit, which makes it impossible for thieves to open new accounts in your name. If you want to open a new account, it’s just as easy to unlock it.

5. They Help You Deal With Identity Theft

If a credit monitoring service finds signs you’ve been a victim of identity theft, it can help you figure out how to deal with the problem. It will walk you through things like reporting the crime, changing your passwords, closing your accounts, and locking or putting a freeze on your credit report.

6. They Insure You Against Identity Theft

Dealing with identity theft can be an expensive and time-consuming process. It involves lengthy phone calls, insured mail, and in some cases, help from a lawyer. Some credit monitoring services come with identity theft insurance to cover these costs.


Cons of Credit Monitoring Services

The perks of credit monitoring services and identity theft protection come at a cost. And according to some experts, it’s too high.

1. They’re Expensive

Prices for credit monitoring services vary. A few services provide some basic protection for free. However, most charge somewhere between $10 and $35 per month, or $120 to $420 per year.

2. They’re Unnecessary

The editors of Consumer Reports argue the risk of identity theft isn’t as high as most people think it is. According to the 2019 Identity Fraud Study from Javelin Research, 14.4 million Americans – roughly 5.7% of all consumers – were victims of identity theft or fraud in 2018.

Moreover, the Federal Trade Commission (FTC) says less than half of all identity theft reports it received in 2018 involved the most damaging form of identity theft: having someone use your personal information to open new accounts. This type of identity theft affected less than 3% of consumers.

3. They’re Inconvenient

Consumer Reports also argues the alerts credit monitoring services provide aren’t that useful. Most of them are about legitimate routine changes in your credit file, such as running up or paying down the balance on one of your existing credit cards. Dealing with these alerts is a hassle, and they do nothing to protect you from real fraud.

4. They’re Ineffective

The most serious problem is that credit monitoring and identity protection services typically can’t prevent identity theft. They can only react to it. Moreover, Consumer Reports argues, they don’t always react quickly. In some cases, they take days, weeks, or even months to warn you after detecting signs of fraud.

Even if these services spot your Social Security number for sale, Consumer Reports explains, “you can’t get it back.” All you can do is take measures to stop anyone from using it. However, people using credit monitoring services don’t always realize this. They assume the service is protecting them, so they aren’t as careful as they should be about guarding their personal information online.

Man Monitoring His Credit Report Score Phone Computer


Alternatives to Credit Monitoring

Signing up for a credit monitoring service isn’t the only way to protect your identity online. There are ways to do some of it on your own. Some are free, while others charge a modest fee. They all require a bit more effort on your part, but they’re all easy.

1. Check Your Credit Report

By law, each of the three credit bureaus is required to give you a free copy of your credit report once a year. The easiest way to get these reports is to visit AnnualCreditReport.com. Make sure you use this exact site. Many sites with similar names are fakes that either try to trick you into paying for credit monitoring or install malware on your computer.

Stagger your reports from the three bureaus throughout the year, checking one every four months. That way, you can find and fix errors on your credit report more promptly. According to the Federal Trade Commission, when you dispute an error with one of the three credit bureaus, the information you provide gets passed along to the source of the error. If the company agrees it has made a mistake, it must report the corrected information to all three bureaus. Thus, disputing an error on one credit report allows you to correct it on all three at once.

Checking your credit report costs nothing, but it has limitations. You can only do it every four months, and you can only catch problems after they occur. Checking your credit report can’t do anything to prevent identity theft or to deal with the problem if it happens.

2. Use Free Banking Apps

Your credit report provides an overview of what’s going on with all your credit accounts. To keep track of those accounts individually, use a website or mobile app. Log in to each of your credit card and bank accounts regularly – monthly, weekly, or even daily – to spot problems like fraudulent charges or missing money right away.

Of course, you can’t use apps to check on accounts you don’t know about. Apps can’t help you spot a new account someone else opened in your name. But the combination of mobile apps and free credit reports does help you catch both new accounts and problems with existing ones.

3. Explore Credit Card Protections

Along with their free apps for checking your account, some credit cards provide extra features to protect your identity. For instance, if you have a Discover credit card, the company monitors your Experian credit report and alerts you of any new accounts in your name. It also checks thousands of black-market websites and alerts you if your Social Security number shows up on any of them.

Some cards from Citi also come with protections for victims of identity theft. If you have one of these cards, the company helps you through the process of reestablishing your credit, even if the card involved in the fraud was from a different company. Citi’s team of specialists helps you report errors to the credit bureaus, other companies, and the police.

The services cards like these provide do at least part of the job of a paid credit monitoring service. And services like these aren’t limited to Discover and Citi. Check the terms of your cards to see if any offer similar protections.

4. Set Up a Fraud Alert

According to a 2018 report by Javelin Strategy & Research, most identity protection services aren’t as good at preventing identity theft as they are at detecting and correcting it. If stopping it before it happens is your goal, put a fraud alert on your credit report. This requires businesses to take extra precautions to verify your identity when setting up a new account in your name.

There are two kinds of fraud alerts. An initial fraud alert, which is available to anyone, is good for one year. You have the option to renew it when that year is up. The other type, an extended fraud alert, is only available to victims of identity theft. An extended fraud alert lasts for seven years.

Both types are free to set up. Just contact one of the three credit bureaus to request a fraud alert, either by phone or online. That credit bureau is then required to notify the other two, so you’ll end up with alerts on all three of your credit reports.

5. Freeze Your Credit

A fraud alert makes it harder – but not impossible – for thieves to set up new accounts in your name. But to be 100% sure no one uses your credit information, you need a credit freeze. A credit freeze completely prevents lenders from pulling your credit report, making it all but impossible for anyone else to open a new account in your name.

However, a credit freeze doesn’t protect you from all forms of identity theft. It keeps thieves from creating new accounts in your name. But it doesn’t stop them from getting into accounts you already have. So even if you’ve frozen your credit, you still need to monitor your bank and credit card accounts for signs of fraud.

As of Sept. 21, 2018, freezing and unfreezing your credit is free throughout the United States. However, freezing your credit takes longer than creating a fraud alert. It only takes a few minutes to set up a credit freeze with one credit bureau. But you must go through the process with each of the three credit bureaus separately.

Moreover, if you ever decide you want to open a new credit account, you have to lift the credit freeze temporarily to do so. Each bureau will send you a password or PIN when you set up your credit freeze. You must use that to lift the freeze either temporarily or permanently. If you lose that PIN, getting a new one is a hassle.

To unfreeze your credit temporarily, contact the credit bureau by phone or online. Provide your PIN and tell the bureau how long you want to thaw your credit. It takes up to one hour for the freeze to be lifted. After setting up your new credit account, contact the bureau again to refreeze your credit.

If you know which credit bureau a lender uses, you only have to unfreeze your credit with that bureau. But if you don’t know or you’re shopping multiple lenders, you must thaw and refreeze your credit with each bureau separately.

6. Recovering From Identity Theft

Most credit monitoring services provide tools to help you recover from identity theft. But a lot of those same tools are available for free on IdentityTheft.gov. The site asks you questions about the crime and then creates a step-by-step personal recovery plan to report the crime and restore your identity. It pre-fills letters and forms to send to businesses and helps you track your progress.

It doesn’t offer insurance to cover the financial costs of dealing with identity theft, which many credit monitoring services do. There’s a chance you already have this coverage as part of your homeowners insurance policy, but most policies don’t include it. And those that do usually provide minimal coverage – typically about $500, according to NASDAQ. That’s quite a bit less than the $25,000 to $1 million most credit monitoring services provide.


Is a Credit Monitoring Service Worth It for You?

You can’t do everything a credit monitoring service does on your own. You can check your credit report regularly for free, but not every day, and you can’t easily scour the dark web for signs of your Social Security number.

You can protect your identity with a credit freeze. But it’s harder to use than the lock and unlock features some credit monitoring services offer. And chances are, you don’t have insurance – or at least, not enough – to protect you against financial loss in case of identity theft.

Overall, credit monitoring and identity protection services do give you something for your money. The question is: Are they worth the cost for you?

To determine this, ask yourself three questions:

1. How Big Is Your Risk?

Identity thieves have lots of ways of getting at your personal information, from phishing scams to stealing your wallet. If your personal information has been exposed – for instance, if you know you’ve been the victim of a credit breach like the Equifax hack or the Capital One data breach – it increases your chances of having your identity stolen.

If you’ve put a fraud alert on your credit file, that makes your risk lower. And if you’ve already frozen your credit, your risk is next to nothing.

2. How Much Could Identity Theft Hurt You?

According to the 2018 Javelin report, about 23% of all victims of identity theft in 2018 lost money as a result of the crime. That’s nearly three times as many as the percentage of victims who lost money in 2016. This increase is mainly because identity thieves are shifting their focus to new-account fraud, which tends to be more costly for victims.

Moreover, the total amount victims lost to identity fraud in 2018 more than doubled from its 2018 level, reaching a total of $1.7 billion. Spread out across the 331,000 victims of identity theft who lost money (23% of 14.4 million, that works out to an average of about $5,135 per victim.

If you couldn’t easily afford to lose that amount of money, then buying yourself a little protection is a smart move.

3. Can You Afford the Service?

Of course, you have to balance the potential cost of identity theft against the price of a service to protect yourself against it. If you’re on a tight budget, spending $120 to $360 per year for a credit monitoring service isn’t a trivial expense.

However, not all credit monitoring services cost this much. Free services, such as Credit Karma or the basic service from Credit Sesame, don’t always give the best protection. But they offer a good alternative if you can’t afford a full-featured identity protection service. TransUnion’s free lock and unlock service, TrueIdentity, also provides $25,000 in identity theft insurance. While Equifax’s basic Lock & Alert service doesn’t offer any other benefits, there’s no charge to lock and unlock your Equifax credit report via the app.


Final Word

There’s no real downside to using a free credit monitoring service, such as Credit Karma or TrueIdentity. These services don’t offer the highest possible level of protection. But they don’t cost anything, so you have nothing to lose by using them.

And signing up for several free services gives you multiple layers of protection. For example, TransUnion TrueIdentity and Equifax Lock & Alert both let you lock and unlock your credit reports at will. For 100% protection, you can then protect your Experian credit report with a credit freeze.

If you want the best protection against identity theft and are willing to pay whatever it takes, spring for a top-rated credit monitoring service that provides the most all-around protection at all levels – preventing, detecting, and dealing with identity theft.

Do you think credit monitoring services are worth the money? Why or why not?

Amy Livingston
Amy Livingston is a freelance writer who can actually answer yes to the question, "And from that you make a living?" She has written about personal finance and shopping strategies for a variety of publications, including ConsumerSearch.com, ShopSmart.com, and the Dollar Stretcher newsletter. She also maintains a personal blog, Ecofrugal Living, on ways to save money and live green at the same time.

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