Credit Monitoring Services

credit-monitoring-services

We cover everything that you need to know how credit monitoring works and what companies provide credit monitoring services.

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What is Credit Monitoring?

Credit monitoring is a service that is offered to people to help keep track of any activity that goes on with that person’s credit report, both good and bad. The reason credit monitoring services have become so popular over the years is due to the rise in identity theft and fraud. Because people want to protect themselves from this type of violation, they turn to experienced credit monitoring services.

Some people check their credit report every year or so and some don’t check it at all unless they are making a big ticket purchase that requires a certain level of credit. A credit monitoring service checks your credit activity on a regular basis so it can report anything unusual to you for further investigation.

It is important to realize and understand that credit monitoring services cannot prevent fraud or identity theft from happening.  But what it can do is catch any unusual activity early on before it escalates to huge proportions that can take years to sort out and fix.

With credit being such an important factor in large purchases, renting homes or apartment and even getting certain jobs, you want to protect your credit from activity that can harm it, especially when that activity isn’t even yours.

If you have ever had to deal with fraud or identity theft before, having a credit monitoring service keeping watch over your credit report and financial activity can feel like having added protection, and it is but consumers shouldn’t rely solely on the credit monitoring service and should also do their own checking and updating simply because those services can’t catch all type of fraudulent activity.

How Does Credit Monitoring Work?

The services that a credit monitoring service offers will vary from company to company but there are some basics that seem to be offered with all companies.  Overall what you can expect from these services is that they will follow the activity on your credit file and if there is anything different, you will be notified.

This notification will typically occur within 24 hours of the change showing up on your credit report. This notification can be a phone call, text message or email which you will choose upon signing up. There are several different types of activities that credit monitoring services will notify you about. We’ve outlined them below.

  • New Accounts that are Opened in Your Name – If a new account or a new loan of any kind is opened in your name, this will show up on your credit report. The credit monitoring service will notify you that these new accounts have been opened.

If there is an error or if you are not responsible for these accounts being opened, you can take care of it right away rather than finding out when the bill shows up or worse, when the identity theft doesn’t pay the bill and you get a mark on your credit report.

  • Address Changes are Made – When an identity theft has access to your information, they can change addresses you have on file so you are none the wiser about the fact that someone else is using your information. Or so they think.

Many credit monitoring services will notify you if any address changes are made to any accounts on your credit report so you can check it out. If your credit monitoring service offers this as one of the forms of activity they will alert you to, be sure to choose it. It can save you a lot of heartache in the event of a problem.

  • Hard Inquiries Made on Your Credit History – A hard inquiry is the name for a check on your credit that a financial institution will do in the event you have applied for a new credit card or loan of some kind. You want to keep the number of hard inquiries into your credit history to a minimum.

For this reason, it’s important to have these hard inquiries monitored. If one shows up on your credit report that you are not responsible for, you can contact the correct institution and get it taken care of, especially if it is fraud related.

  • Changes in Your Spending Habits – If your credit card accounts suddenly see a change in activity, they will notify you about these changes. In many cases the credit card company itself will notify you if they detect a sudden surge in spending or spending in vastly different areas than you normally are shopping.

Even if you get notified by the credit card company AND your credit monitoring company, it’s better than not being notified at all and you can do something about it immediately.

  • Changes in Your Score – If there is any movement in your credit score, a credit monitoring service will send an alert to let you know. It doesn’t matter if the change is good or bad. This helps you keep up with your score and if there is a sudden change down and there is no recent activity that you are responsible for, having it checked out is to your advantage.

What are the Three Main Credit Bureaus?

There are three main credit bureaus that lenders of all types go through to get information on your credit history.

  • TransUnion
  • Equifax
  • Experian

All three of these companies gather and store your credit information.  You may notice that your scores differ slightly among the three credit bureaus.  You may even find that something that shows up on one credit bureau doesn’t show up on another.  You may be wondering why there is a discrepancy between the three bureaus.  This is due to several different factors.

  • What bureaus your credit accounts report to (not all credit accounts report to all three bureaus)
  • Different scoring models between the credit reporting agencies
  • How often the credit accounts report to the bureaus

It’s not cause for alarm if the different credit bureaus have different scores unless the scores are significantly different.  You want to check into it further if the differences are major and if they are due to inaccuracies do what you need to do to get them taken care of.  A credit monitoring service gives you that ability to check on things such as this on a regular basis.

What is a Credit Report?

credit-reportA credit report is a detailed account of all of your credit history and personal information. It is put together by the three credit bureaus and is used by lenders of all kinds to determine if they should extend credit to you.  Below are the most common things that are included in your credit report.

  • Personal information that will include your current and previous addresses, social security numbers, employment history and any aliases you have used.
  • A summary of all of your credit accounts that are in good standing or past due (this will include the number and type of accounts you have)
  • Detailed account information on each credit account you have including late payments and the length of time it was late, etc.
  • Accounts that have been turned over to a collection agency. This will include liens, wage garnishments, judgments, bankruptcies, etc.
  • Number of hard inquiries that have been made on your account as well as soft inquiries

There are also several things that won’t show up on a credit report. These are listed below.

  • Any bankruptcies that are over 10 years old
  • Collection debts that are over 7 years old
  • Your gender
  • Your race
  • Any checking or savings accounts you have
  • Your religious affiliation
  • Your political affiliation
  • Your medical history
  • Any criminal records you may have

What is a Credit Score?

A credit score is a three digit number that is calculated from detailed credit information about you.  It can be your biggest asset or your worst enemy when it comes to being able to get new loans, the best interest rates and to qualify for other benefits that are determined by credit score.

The higher that three digit number is the better your credit score is. That will translate to a lot of benefits for you that you won’t be offered when your score is low.  Those who struggle with a low credit score will find that it can affect everything from getting a new cell phone to applying and getting certain jobs. For this reason, it is important to protect your credit score and if you have a low one, work on getting it improved.

Your credit score is made up of several different factors.

  • Payment historyMakes up 35% of your score. This will include any late payments and on-time payments you’ve made, any accounts that are currently late, the length of time that has passed since any late payments occurred, any derogatory public records such as civil judgments, liens and bankruptcies, collection agency debts and the number of accounts you have that are in good standing.
  • Amounts you oweMakes up 30% of your score. The number of accounts and the amount of your balances, the ratio of installment loans to the amounts you first borrowed, ratio of total monthly balances to your total credit limits.
  • Length of your credit historyMakes up 15% of your score. The age of your credit card accounts and loans, the date of the last activity you have for each account.
  • credit-report-percentageNew credit you haveMakes up 10% of your score. The age of the accounts you have recently opened and the percentage of recently opened accounts, the amount of recent credit inquiries you have which can include new credit cards, mortgages, loans and utility accounts and the comparative percentages.
  • Types of credit you haveMakes up 10% of your score. The different types of accounts you have such as retail accounts, installment loans, mortgages and credit cards. Note that mortgages are much harder to keep up with and have a very strong impact, good or bad, on your score.

All of the above factors are calculated and are combined to create your Fico score which is a very popular term that you may have already heard used fairly often when it comes to getting credit, especially a home loan or auto loan of some kind.

What is a Fico Score?

The Fico score has been around for a long time and is currently the most widely recognized of the different types of credit scores.  It is also the credit score that most lenders will end up using and is comprised of the information that we listed above.

Fico is short for the Fair Isaac Co. Years ago it was officially shortened to Fico and has been known as such ever since. Fico scores can vary depending on the credit bureaus they are coming from. Fico itself is not a credit reporting agency.

What are the Credit Score Ranges?

There are different score ranges for each of the top three credit bureaus, Fico and a relatively new scoring system called VantageScore 3.0 that is starting to gain in popularity. Vantagescore was created by all three of the major credit bureaus as a means of simplifying the credit score system.  Overall, the higher your score the better you look to potential lenders.

Fico – Ranges from 300-850

Experian – Ranges from 330-830

Equifax – Ranges from 300-850

TransUnion – Ranges from 300-850

VantageScore 3.0 – ranges from 501 – 990 and is often assigned a letter grade from A to F

Now you know the ranges that the three credit bureaus and Fico use, but how do you know where you fit in and whether your score is considered good, poor, average or great? We have broken it down for you below so you can identify where you fall on the chart based on your current score.

A score of 300-629 = Poor Credit

A score of 630-689 = Average Credit

A score of 690-719 = Good Credit

A score of 720+ = Excellent Credit

These ratings are fairly common throughout the different lenders, but understand that each lender will have its own rating system. What may seem like fair or average credit to one lender may be considered good to another. In general though, you can rely on the above ratings as a gauge of where your own credit score falls.

How Long do Negative Items Stay on My Credit History?

negative-creditOnce negative marks get onto your credit report there is a certain amount of time that they spend there. Depending on what they are, sometimes you can negotiate with the creditor to get them removed but that will vary from lender to lender.

All of your personal information such as addresses and names remain on your credit report indefinitely. Positive information also remains there indefinitely. Below is a list of common negative marks on your report and how long they are usually a part of your credit report although this will vary.

Closed Accounts – If there were any late payments on the accounts it will stay on your report for 7 years; if the account was in good standing it will remain on the account permanently.

Charge-Offs – A charge off is when the lender you owe writes the balance off as a loss and no longer expects it to be paid. These will stay on your report for 7 years.

Collection Accounts – Accounts that are in collections will typically remain on your credit for 7 years from the date of the last late payment.

Inquiries about Your Credit – These stay on your account for only 2 years.

Late Payment/Delinquent Accounts – Will stay on your report for 7 years from the date of the last late payment

Judgments – A judgment will remain on your credit report for 7 years from the filing date if it is paid. If it is left unpaid it will stay there longer.

Tax Liens – If the lien is paid, it will remain on your report for 7 years from the date it is paid. If left unpaid, it will remain 15 years or more.

Bankruptcy – If you file chapter 7 bankruptcy, it will remain on your report for 10 years from the date of filing. For Chapter 13 filers, it will remain on your report for 7 years and each record marked “Included in BK” will also remain for 7 years.

What Are Some Good Credit Reporting Companies?

Credit Karma is one of the most popular credit reporting companies on the internet right now.  They offer a variety of services that can help consumers keep track of their credit ratings and stay alerted to any changes that occur.

They get information from two of the three major credit bureaus: TransUnion and Equifax.  There is no cost for Credit Karma but they will give recommendations on products that can be purchased that will help improve your overall score or that will fit your credit profile.

Credit Karma will:

  1. Check your credit report on a daily basis
  2. Provide a credit report card to explain the details of your report to you
  3. Send email alerts when anything changes on your report
  4. Will keep track of individual credit cards, auto loans, personal loans and real estate loans to ensure no fraudulent activity is present
  5. Offers a credit score simulator that users can input financial transactions into to see what it will do to your credit score.

Free Credit Report is another company that offers credit reporting services. They offer consumers a great $1 trial for 7 days and then go to a paid monthly service of $14.99 per month. They only use Experian to get their information but they do offer unlimited access to that credit bureau for account holders.

Free Credit Report will:

  1. Alert you every time your score goes up or down so you can check out the reason for the change
  2. Provide bi-monthly monitoring
  3. Give consumers a monthly statement that includes your credit score, a summary of any key financial information that is relevant, and any alert notifications you have received.
  4. Offers a $50,000 guarantee
  5. Offers consumers access to a fraud resolution specialist that can help if you are dealing with identity theft or fraud on your report

Credit Sesame is another free credit reporting company. They use Experian credit bureau. They provide their customers information and recommendations on ways to help save money on anything from credit cards to auto loans.

Credit Sesame will:

  1. Provide a monthly credit score that is calculated similarly to how FICO is.
  2. Provide you with an analysis of all of your credit cards and loans
  3. Monitors market rates and suggests things that can save money
  4. Provides an iPhone or Android app for convenience

These are just a few of the many credit reporting companies available. There are quite a few and each one of them offers consumers different options and benefits.

What is the Best Credit Report Monitoring Company for Me?

When it comes to choosing the right credit report monitoring company, you should look for several things. Never just sign up for the first one you find. We have provided some guidelines that you can follow to check out each credit report monitoring company you are considering.

It is worth taking the time to check them out so you find the best company for your needs that will truly benefit you and provide what you are looking for. Not all credit report monitoring companies are created equal so taking this extra time now will pay off later.

  1. What Credit Bureaus do They Check? – You want to go with a credit monitoring company that uses all three credit bureaus. The reason for this is because not all credit accounts and lenders report to all three. By using a company that pulls from all three major bureaus, you are assured a thorough snapshot of your credit.
  1. How Long Has the Company Been Around? – You want to find credit monitoring companies that have some longevity and security experience behind their name. There are dishonest companies out there so finding the ones that have a good reputation and information to back that up are much better for you.
  1. If it Sounds too Good to be True… – Pass by companies that are making grandiose promises. If they promise that you will never become a victim of identity theft or fraud by using their services, they are lying. No reputable company will make that claim because it is not an accurate claim to make. A credit report monitoring company can’t prevent fraud or identity theft, but they CAN help you catch it as soon as possible.
  1. Check Them Out with the BBB – The Better Business Bureau can be really helpful when it comes to weeding out the posers from the good companies. If there have been complaints filed, the BBB will have them. You can also check the state attorney general.
  1. Popular Brand Names Have an Edge – Popular companies don’t typically become popular by being shady and dishonest. This doesn’t mean to trust them blindly just because of the name, but with all of the choices out there, going with a more well known name could be a good move. You still need to check them out but they have an advantage over an unknown.
  1. Don’t Sign Up for Services You Don’t Need – Make sure that you know in advance what the credit report monitoring company offers before you sign up. You want to choose a company that provides the kind of monitoring you need and want but you don’t want to pay a higher cost for a bunch of services you won’t even use.
  1. Do They Offer Free Trials? There’s nothing wrong with taking a company up on a free trial offer, but make sure you know exactly how long that trial is, how much it is, what you get during that trial (do you have access to full services?) And how much it costs after the trial is over. Also make sure you know how to cancel if you don’t want to continue so you don’t get charged if you are not continuing with them.

Conclusion

Credit Report monitoring companies can be very beneficial when it comes to keeping track of your credit reports, scores and identity. While even the best credit report monitoring company can’t prevent identity theft or fraud, they can help you stay on top of any activity that is suspicious and help you get it taken care of right away.

Do your homework when you are researching the different companies and make sure you know exactly what you can expect from the company you choose. It’s a very good way to gain more control over your identity and credit history.

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