Is Credit Monitoring A Good Way To Protect Your Identity?

Identity theft is a crime that can wreak havoc on your finances and do severe damage to your credit score. Sadly, it occurs far too often, and even the most vigilant consumer can end up becoming a victim.

Data breaches, lost wallets, and even mail theft can put your personal information into the hands of criminals. With this personal information, these criminals can then apply for new credit cards, loans, and other accounts in your name.

To help address the problem of identity theft, credit reporting agencies offer individuals in vulnerable positions credit monitoring services. Read below to find out what this service is, how it can help you, and where it falls short, as well.

What Is Credit Monitoring? 

Credit monitoring is a paid service that helps you keep track of changes to your credit report. Whenever a change occurs, the credit monitoring service provider will notify you. As an example, if a lender conducts an inquiry on your credit report to process a loan application, you’ll receive an email or mobile notification alerting you of the action. Credit monitoring services track a wide variety of changes that impact your credit report, including late payments, credit score changes, new accounts, and updates to your personal information.  

Does Credit Monitoring Protect You from Identity Theft?

Yes and no. Credit monitoring is a reactive solution rather than a proactive solution to identity theft. There aren’t any safeguards in place that actually prevent unscrupulous individuals from taking advantage of stolen information. The monitoring system in place only alerts you to changes that appear on your credit report – it’s up to you to take action to remedy any unauthorized charges or credit checks.

Credit monitoring services can lull you into a false sense of security, convincing you that your personal information is safe when it’s still vulnerable. However, it does serve a useful function by sending you fraud alerts, allowing you to take swift action to rectify any fraudulent activity.

Interested in getting fraud alerts? Check out our list of credit monitoring services.

Where Can You Get Access To Credit Monitoring Services?

Pros Of Credit Monitoring

• If you’re trying to build your credit scores, it can help you keep tabs on your credit scores progress.
• It can alert you of any suspicious activity such as a new credit account opened in your name.
• You’ll be able notified of any missed payments.
• Some credit monitoring services come with additional tools and services that can help you monitor and build your credit scores. 

Cons Of Credit Monitoring

• Most credit monitoring services will have a monthly fee. These fees can range from anything between $9.99 and $34.99 a month.  
• Credit monitoring does not prevent identity theft. It only helps you identify it quickly.

Is There A Way To Stop Identity Theft From Happening In The First Place?

Though criminal identity theft tactics are growing increasingly sophisticated, there are many things you can do to mitigate the risk of becoming a victim, such as:

• Store sensitive documents in a secure location.
• Only provide sensitive information if necessary, whether in person, by phone, or online.
• Conduct online purchases only on safe websites.
• Use complex passwords online and change them often.
• Destroy financial documents before discarding them in your trash.
• Keep your virus protection and firewalls updated on your computer.
• Don’t download files or click on links that you don’t know.

However, if your information has already been stolen, there’s little you can do to prevent it from being used by criminals. Your best plan of attack is to habitually monitor your credit report, bank statements, and credit card statements for suspicious items. Should you discover evidence of fraudulent activity, submit a dispute with the credit agencies right away.

Additional Reading

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What Should You Do if You’ve Been A Victim Of Identity Theft?

No one is immune to identity theft. If your identity has been stolen, remember to not be hard on yourself or allow anxiety and fear to dominate you. Follow the steps below to remedy the harm done and prevent the situation from escalating further:

1. Contact the credit agencies to place an alert on your credit report. This warning will encourage lenders who access your report to contact you and verify your identity.
2. Keep detailed records of your phone calls.
3. Follow up with individuals you’ve been in contact with, ensuring you have a record of any agreements made.
4. Make copies of all original and relevant documentation related to the incident, including police reports and correspondence with companies. 
5. Keep all files related to the incident stored away as evidence in case the issue remerges.

Bottom Line

Though credit monitoring has its flaws and limitations, the service effectively warns you of fraudulent activity on your credit report, allowing you to take action to erase it from your credit history. Unfortunately, credit monitoring doesn’t directly stop identity theft, nor does it act as a deterrent against thieves.

A better alternative to credit monitoring is a credit freeze, enabling you to lock your credit file, preventing anyone from opening an account or performing a credit inquiry. Sadly, credit freezes are currently not available in Canada. However, with identity theft becoming an increasingly common problem, public pressure could eventually require credit agencies to offer free credit freezes for all Canadians.