Credit Monitoring: Is it worth the cost?

August 16th, 2010

From Chris Corrigan’s Money U Need blog (with permission):

Credit reports have become so widely used, a good report almost is almost as necessary as air. We are all aware our credit reports are checked when we want to finance something like a house, car, or get a credit card so they can determine if you qualify and how much interest to charge you. Employers will access your credit report to see how responsible you are and even insurance companies are accessing it to see what kind of risk you are. Even your professional license may be at risk with a bad credit report. So, what can you do to help make sure your report stays accurate? Here are some tips.

Identity Theft Detection

Identity theft is rampant and, in today’s economy, is on the rise. People will find someone with good credit and steal their identity. You may not know your identity has been stolen until you try to purchase something and are either turned down or charged an ultra-high interest rate. If you are the victim of credit card theft, and they have changed the billing address to something other than yours, you won’t know until your credit is already being ruined. A good credit monitoring service can alert you to any changes in your credit report and allow you to take action to prevent identity fraud.

Credit Management

Managing your credit through careful spending, making sure you pay all bills on time, and keeping your credit card balances well below the limits are key, but that is only part of it. Stop applying for every credit card that comes along since that generates hard inquiries to your credit report. These are counted against you with your credit score. Soft inquiries, such as you accessing your own credit report are not held against you, so you won’t be penalized for watching your own report.

Credit monitoring will also help keep you in touch with your spending and payment habits. It’s gratifying to see any late payments drop off and see all green on your report. It’s also nice to see that credit score start on the upward trend. You can see the ratio of debt to income and begin to work that in your favor.

There are several credit monitoring agencies out there. Research and find one that offers a trial period or money back guarantee of some sort. Credit Sentry is unlike other monitoring services that bill you monthly, offering protection for a one-time fee. They have a money-back guarantee, so there is no risk.

There is also a great book on how to repair your credit with practical advice to help you raise your credit score: Credit Counseling for Credit Reports and Credit Repair Workbook.

You are the first line in the defense of your credit report.