Can Credit Monitoring Prevent Identity Theft?

Most credit monitoring products continually "monitor" your credit report for changes, like when a new credit card account is opened in your name, when there is a change in your name or address, or when a company runs a credit check on you.

A credit monitoring service sends you alerts of these changes. Granted, if you’ve applied for a new credit card, the alert you receive letting you know about it won’t be news to you. But anytime someone else attempts to apply for credit in your name, the alerts will clue you in to the fact that a criminal is at work. You can then take steps to stop them.

Credit Monitoring Alerts Help You Prevent and Detect ID Theft

Receiving an alert of a credit check (often called a "credit inquiry") that you did not authorize could be a sign that an identity thief is attempting to apply for credit in your name. (Most creditors perform a credit inquiry to review the applicant’s credit history before extending credit). Receiving an alert of an unauthorized credit inquiry lets you take steps to block the thief from completing the fraud. You can contact the lender who ran the credit inquiry to explain the situation before they open the account. It would also be a good idea to place a security freeze on your credit report. 

Receiving an alert that a new account has already been opened in your name is also still beneficial. While the crime has technically already occurred, you can put an end to it much quicker – before the ID thief’s debts pile up and send your credit down the drain. Knowing about fraud as soon as possible gives you the chance to minimize the damage it can cause.

Without credit monitoring, you probably wouldn’t learn that a thief had opened an account in your name until after the debt was sent to collections. By that point, the outstanding debt will have already caused significant damage to your credit score. Some identity theft victims find out about the crime when they go to apply for a new line of credit and are denied because a thief has ruined their credit rating. To avoid this, signing up for a credit monitoring service is a good way to detect identity theft before it gets out of control.

Note that signing up for a credit monitoring service does not hurt your credit. 

Alternative to Credit Monitoring: Manual Credit Checks

You could manually check your credit reports for signs of fraud, but you have to be diligent about remembering to check all three of your reports from TransUnion, Equifax, and Experian several times a year for it to truly be effective. A credit monitoring service that continuously monitors all of your credit reports makes identity theft protection and detection much more convenient.

Related Links:

What CAN'T Credit Monitoring Do?

Placing a Security Freeze on Your Credit Report

Placing a Fraud Alert on Your Credit Report