If you’ve heard me talk about how to prevent identity theft you know I’m not a fan of paid credit monitoring services. Is your credit secure if you pay the monthly fees for this type of service? Let’s take a look at the promises and the realities.
What are advertisers telling us?
Here’s what Experian is telling us (I added the bold and emphasized text):
Checking your credit reports regularly is one of the best ways to engage with your credit information. It can also help you detect suspicious activity that may appear on your Experian credit report, allowing you to minimize the damage from identity theft or fraud. Experian Credit Tracker Credit Monitoring checks your Experian credit report each day, and notifies you when key changes are detected. You also receive unlimited access to your Experian credit report and FICO Score powered by Experian – helping you track your credit activity and live credit confident.
It’s the best way!
It minimizes damage!
You can live credit confident!
This web page sounds like something written by highly paid marketing folks in white lab coats running focus groups to determine which words are going to trigger you to buy these expensive products.
You can live credit confident! What does that even mean? And who cares about unlimited access? How often are you checking your credit right now? Every day at lunch? Every time you log on to Facebook?
You need to check your credit at least once a year, or a little more often if you’re planning on buying a house and have bad credit.
What are monitoring services promising us?
A credit monitoring service promises you:
- Alerts of changes to your credit
- Assistance if you suspect fraud
- Access to your credit reports
- Access to your credit score
Those all sound like good things. Who wouldn’t want that stuff?
What are they charging us to make our credit secure?
These services can vary by the seller, but let’s look at what those promises will cost you each year to make your ‘credit secure’:
- AmericanExpress CreditSecure: $179.88
- Experian: $239.40
- Trans Union: $215.40
- LifeLock: $109.09 – $329.89 annually
- Zander Insurance: $75.00 – $145.00 annually
$329.89 a year??? That’s outrageous!
Now if you were to visit any of those websites, you’re not going to find the yearly cost for the service. Instead, they emphasize a monthly fee.
Why do you think they do that?
It’s because $19.95 a month isn’t that much, is it? $20 bucks? That’s no big deal. But if I told you it was $239.40 – well, that’s a big chunk of change, isn’t it? That’s a car payment for some people.
What’s that going to cost you over ten years?
Yikes. Now we’re talking some serious coin. That’s a week’s vacation someplace nice. Where would you go on vacation if you had $2,394.00 to spend?
Here’s how to get more – for less – and make your credit secure.
Get the benefits without paying the price
When I talked about security freezes, I showed you how to get all the same things to make your credit secure, make it more secure, and at a fraction of the price.
Let’s look at each promise from the credit monitoring service and how you can get the benefits without paying the price.
Promise #1: Alerts you of changes to your credit
With a credit freeze, nobody can change your credit or take out new credit in your name. You’ll never be bothered by alerts because you will be protected.
Why would you want to be alerted anyway?
Hey if you were at your kid’s peewee baseball game would you want to receive a text message that there is a fire in your kitchen because you forgot you put a pizza in the oven, and it’s now burning? What good is the text message going to do you – your kitchen is on fire! That’s what credit monitoring is like – sending you a text message after the problem has occurred.
You want the oven that is so smart it knows you’re going to the baseball game in 20 minutes, so it won’t even let you turn the oven on or open the oven door to cook anything. That’s an impressive oven.
Promise #2: Provides assistance if you suspect fraud
Providing you with assistance is a moot point if you have a security freeze on your credit accounts. You wouldn’t need assistance because nobody would be stealing your identity. But for the sake of argument let’s see what Experian’s website has to say about this:
A representative will call your card issuer with you on the phone line to help cancel and replace lost or stolen cards. This service requires that you remain on the phone for these calls. There may be times where an issuer will not permit us to remain on the line and you will have to complete the process without us.
So the assistance of the monitoring companies consists of sharing a phone call with you to help you fix your credit. I thought I was just paying someone to ‘fix it’? Fix it! That’s what I would want to be done. But apparently that’s not the case. Yes, they give you a helping hand, but you’re still spending your time fixing the mess.
Promise #3: Access to your credit reports
Regularly monitoring your credit reports is an important part of being in control of your finances. You can get free access to your credit reports.
‘Regularly’ for me is about once a year. If you plan on buying a home and taking out a mortgage in the near future, you’ll want to check your credit report and fix any problems about twelve months before your purchase.
So, instead of a monthly fee, I can get my credit reports for free once a year, which is all I need them. That sounds like a deal to me.
Promise #4: Access to your credit score
Your credit score – also known as your FICO score – is essential for getting a good mortgage rate, no question there. If you have a low credit score, you’ll want to work on improving it to get the best rates.
Each of the three main credit bureaus has a FICO score on you – Equifax, Experian, and TransUnion. But you can’t find or buy that information from them.
You can come close to getting an approximate FICO score by using a free service like CreditKarma.com. And the best thing about that website is it’s free.
Read the fine print
If you go to LifeLock’s web page you’ll find a ton of mice-type, just like all the other monitoring services. The key one that I found was a statement with a little cross next to it. Down in the mice type the cross states:
Network does not cover all transactions.
Oh. So why would you pay $109.09 a year not to cover every situation?
If you’re going to pay for a credit monitoring service please read all the service agreements and mice-type. They all contain legalese (lawyer speak) about the limitations of what the service provides.
Those limits protect the company, not you.
No one can prevent all identity theft
That’s a kicker of a statement, isn’t it? But that’s exactly what it says at the bottom of LifeLocks’ web page – no one can prevent all identity theft. If a credit monitoring service is telling you this in mice type at the very bottom of their web page, you might consider not buying their product. That’s not a life lock, that’s a life shock.
I’d suggest you consider the best way to prevent identity theft – with a cheap and easy security freeze, not a costly monitoring service.
What do you think now about those promises to keep your credit secure? Here’s my opinion:
- They aren’t foolproof
- They are a big drain on your wallet
- They over promise and under deliver
- They still require you to do the work if issues in your credit reports appear
- There are great alternatives to get your credit reports and credit score for free
Credit monitoring services are a great way for companies to make money off you by selling you peace of mind. But what they are really doing is taking a piece of your hard earned income. There are other (better) options for less money (or free).
Save your money, save your identity – put security freezes on your credit files today at all three major credit bureaus. If your paying for a credit monitoring service, save some money and use the free services from CreditKarma.