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Credit Monitoring Services

Credit Monitoring Services

Credit Monitoring Services

Learn about credit monitoring and understand what you may (or may not) be buying

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About Credit Monitoring

Credit monitoring service

Credit monitoring services are fee-based subscription services intended to allow you to receive notification whenever there is a change to your personal credit report, such as a new credit inquiry, a new credit account, or significant change to an account balance. These services can potentially offer you early notification of certain types of fraudulent credit-related activity. However, these services are also sometimes inaccurately marketed as the ultimate solution in personal identity theft protection.

Fraudulent financial accounts or credit fraud is only one potential outcome of an identity theft incident, and thieves can easily misuse your information in many ways that may never show on your credit report.

According to the Federal Trade Commission, credit account-related identity theft comprises only a small percentage of all identity theft cases. In 2010, government documents and benefits fraud was the most common form of identity theft reported to the FTC (19%), followed by credit card fraud (15%), phone or utilities fraud (14%), and employment fraud (11%). Other significant categories of identity theft reported by victims were bank fraud (10%) and loan fraud (4%).1


Credit monitoring services do not always work the way that identity thieves operate

Many consumers are unaware that credit monitoring services were developed and offered by the credit reporting agencies long before identity theft became a crime epidemic, and were developed for the purpose of assisting consumers in managing their credit rating based upon the way that the credit reporting system operates (not the way that identity thieves operate).

These services were not developed for the purpose of preventing identity theft, and identity thieves continually develop new tactics to misuse victims' identities while avoiding detection. A new and rapidly growing form of identity theft, known as synthetic identity theft, vividly proves this point. In synthetic identity theft, thieves use combinations of real and fictitious information - creating a synthetic identity that does not neatly fit within the credit reporting mold and often bypasses detection by traditional credit monitoring services.

For example, in December of 2006, the New York Times published an article entitled "Protectors, Too, Gather Profits from ID Theft".  A brief excerpt from that story follows:

"Melody Millett was shocked when her car loan company asked her if she was the wife of Abundio Perez, who had applied for 26 credit cards, financed several cars and taken out a home mortgage using a Social Security number belonging to her actual husband.

Beyond her shock, Mrs. Millett was angry. Five months earlier, the Milletts had subscribed to a $79.99-a-year service from Equifax, a big financial data warehouse, that promised to monitor any access to her credit records. But it never reported the credit activity that might have signaled that they were victims of identity theft."

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Credit monitoring services may cost between $8 and $30 per person per month. Is it worth it? That truly depends upon the service and what is being provided. And remember, federal law allows you to receive annual copies of your credit reports for free. If you are not actively applying for credit yourself, another available alternative is a credit security freeze.

7 Considerations and Limitations of Credit Monitoring Services

If you are considering enrolling in a credit monitoring service, or have already done so, here are some considerations and common limitations of many services that you should be aware of to help you determine how the service stacks up:

  1. Many credit monitoring services only monitor one credit bureau.
    Some services may provide you with an initial three-bureau report on the first order, after which they revert to monitoring only one bureau. This may not be clearly disclosed to you upfront. While major accounts such as home and auto loans are typically reported to all three national credit bureaus, non-major account creditors often report to only one bureau. If a service does not monitor all three bureaus, it may miss accounts reported to one or both of the other bureaus.

  2. Many creditors only report to the credit bureaus once per month or quarter, and credit bureaus can only report what has been reported to them.
    While weekly or even daily monitoring can provide early notice of credit inquiries, you need to review the alerts and promptly follow up on the inquiries to gain the maximum benefit of the early warning. If a fraudulent account is opened in your name, it may still be 30 to 60 days or more after the initial inquiry appeared before the account itself is actually reported on your credit report. During this time, identity thieves may have already engaged in significant fraudulent activity. In cases involving non-major or non-credit accounts that may not involve credit review, (such as utility accounts, cellular or cable service, rentals, medical and dental services, etc.), the account may never be reported on your credit report in any form until after it has already been sent to collections.

  3. Credit monitoring can be useful to provide an early warning that a new account has been opened in your name, but the task of disputing the accounts and resolving the fraud may still be left up to you.
    Many credit monitoring services do not include much more than minor resolution assistance or a few simple form letters; and, most do not include assistance with any matter beyond those items that are reported on your credit report.

  4. Credit monitoring services generally do not monitor check fraud and check verification databases.
    Your liability limits for fraud and unauthorized transactions in cash accounts, such as checking and savings accounts, are time-sensitive, and the potential liability (and potential damage) is significantly higher than credit-related accounts. Federal law generally limits your liability for credit card fraud to $50 per card, while your liability for fraud in cash accounts can be unlimited.

  5. Most credit monitoring services do not monitor specialty consumer reporting companies (such as ChoicePoint or Chex Systems), public records databases, driver's license records (DMV), criminal records (NCIC), Social Security records (SSA), medical records (such as the Medical Information Bureau), etc.
    This means that credit monitoring will not alert you if someone has obtained a driver's license, birth certificate, Social Security card, or other such documents or identification in your name. It also will not alert you if someone has used your name during interactions with law enforcement, resulting in arrest warrants or erroneous criminal records, or if someone has filed taxes or obtained medical benefits or healthcare services under your name and SSN, or any number of other activities. Credit monitoring will also not report to you in a timely fashion, if at all, when an identity thief has fraudulently obtained employment using your name and Social Security number. (In some states, employment identity fraud approaches one-third of all identity theft cases, and can cause victims significant financial cost, inconvenience, and potential tax liabilities.)

  6. Credit monitoring may not detect synthetic identity theft
    Credit monitoring services generally will not catch instances of synthetic identity theft - in which a thief uses a variation of your name, date of birth, or address in conjunction with your real Social Security number, or vice-versa. Because of the way in which the credit reporting system functions, synthetic identity theft activity is far less likely to be identified on a credit report than true name identity theft because the synthetic identity information used to open new credit accounts cannot be neatly matched to one particular consumer’s real identity information. If any synthetic identity information does appear, it is often merely linked to the main credit file as a sub-file, rather than appearing in or being linked to the main credit report header. When this happens, that information may be completely ignored by credit monitoring services that focus only on accounts and credit inquiries firmly linked to a consumer’s real identity information.

  7. If a company or organization notifies you that your information was lost or stolen, the potential damage isn’t limited to what shows up in your credit report.
    When a company or organization has a data breach and elects to offer credit monitoring to the impacted consumers, what type of service and how long it is being offered are both public knowledge. If the service is provided for free, there's little reason not to accept it. However, don't be lulled into a false sense of security. Be aware that prospective cyber-thieves also know what actions the company is taking, what service is being offered, and how to commit fraud in your name without it appearing on your credit report. And remember - once your information is in the hands of thieves, it is also not simply used and then thrown away. Your information is frequently sold and re-sold to other thieves and you may be victimized, or re-victimized, at any time in the future.

Important Note:  The preceding information is not intended to discourage you from potentially utilizing a credit monitoring service; rather, it is intended to assist you in understanding the limitations of such services so that you can make an informed decision and obtain the best value. Credit monitoring services can certainly play some role in your overall risk management plan, but should not be your only means of identity theft risk management. You cannot rely solely on any service to protect you from identity theft or fraud - you must also take care on your own to safeguard your personal information at all times.

1 U.S. Federal Trade Commission. "Consumer Sentinel Network Data Book," March, 2011.
2 Dash, Eric. "Protectors, Too, Gather Profits from ID Theft," The New York Times. December 12, 2006.

This article written and ©Copyright by Michael Barnett. All rights reserved. Published with permission.

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