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| The Basics | Should you hire a credit watchdog?
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You could spend as much as $15 a month to have someone watch your credit report for suspicious activity. Or you could do it yourself for free.
By Liz Pulliam Weston
The good news is that credit monitoring is getting better.
The bad news is that it's still too expensive.
A few years ago, you would have had to sign up for at least three different services and shell out more than $200 to get true continuous credit monitoring. Most of the services offered daily reviews at only one bureau and checked with the other two quarterly, if at all.
Today you can buy comprehensive credit monitoring that checks all three bureaus daily for suspicious activity. This is important, since the three main credit depositories -- Equifax, Experian and TransUnion -- are separate, private businesses that typically don't share information. You could easily have an identity theft problem that shows up on one report but not the others.
In addition to being more complete, the new credit-monitoring services also offer more options for how you'll be alerted: e-mail, phone, text messaging, regular mail. Most have $20,000 or more of insurance coverage, and some throw in credit scores to boot. But most services charge $150 or more for the privilege of knowing what's happening with your own credit.
Do you need it? Probably not
The high cost is the main reason most people should pass on credit monitoring. The reality is that you probably don't need it, and you almost certainly have better things to do with your money.
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The exceptions:
- You've already been the victim of serious identity theft. By "serious," I mean someone has opened or attempted to open accounts in your name. If someone simply swiped your credit card or credit-card number, your problems likely ended when you canceled that card and you probably aren't at increased risk of further identity theft. If someone knows enough about you to get new accounts created, you may be in for months or years of trouble.
- You're at high risk to become a victim. If instead of swiping your card, a thief got your entire wallet -- including your Social Security number -- your potential exposure to ID theft just skyrocketed, since that number is the key to creating new accounts. (You may be vulnerable even if you know better than to carry your Social Security card; some health insurers, universities and even states use the numbers on the ID cards they issue, despite the enormous risk to consumers.) You're also at higher risk if a company informs you that your private financial data has been stolen, or if your circle includes some unsavory characters such as a nephew who's a drug addict or an ex bent on revenge. Read "8 signs you may know an identity thief" for more details on how to spot potential trouble.
- Someone else is paying the bill. Several firms who lost critical data to potential identity thieves have tried to make amends by offering credit monitoring to affected consumers. If you're offered this service, find out first if you'll be waiving your right to file a lawsuit should you sign up. If you can benefit without losing your rights, consider doing so. If you're not offered credit monitoring by a company that lost your data, ask for it anyway.
Unless you fall into one of these camps, you may be better off ordering your own reports once or twice a year. Federal law now requires that each credit bureau give everyone who asks one free credit report; you can give yourself pretty good free monitoring simply by staggering your orders throughout the year -- order your Experian report each January, your Equifax report each May and your Trans Union report each September, for example. (To learn more about your annual-report rights, click here.)
If you want more coverage, you could order (and pay for) additional sets of reports from each of the bureaus throughout the year (at $8 to $9 per report) and still spend less than you would for credit monitoring.
Youve bought knowledge, not safety
If that's not enough for you -- if you're in a high-risk situation or simply won't sleep at night without daily monitoring -- keep in mind that no service can prevent identity theft, any more than a mammogram can prevent breast cancer. What monitoring (and cancer screening) can do is alert you to a problem early enough that you have a better chance of containing the damage.
Also, don't be too impressed by the services' ancillary features, like credit scores and insurance. Tracking your scores is nice, of course, but most services don't provide FICOs, which are used in most lending decisions. Typically, the numbers you get will be some kind of "consumer education score" that may (or may not) approximate the scores lenders actually use.
And the vast majority of identity-theft victims don't pay much if anything out of pocket, as I noted in Insurers profit from your identity-theft fears.
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MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.
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