Most companies that monitor credit rating charge between $15 and $20 per month, which can really add up if you’re just starting out. Their appeal is in the service they advertise—preventing credit fraud and identity theft seems like a great idea, certainly worth $200. Right?
Probably not. Unfortunately, credit fraud can only be dealt with once it occurs, and companies that monitor your accounts are probably doing about the same amount of work as someone who semi-regularly checks their account for suspicious activity. Additionally, credit monitoring services may track a score that is different than the one used by lenders.
There are certain situations in which a credit monitoring service may be helpful. If you’re trying to improve your credit score before a major purchase, you might consider temporarily purchasing a monitoring service. This way, you’ll be easily able to track your score from month to month for a reasonable fee—it can get expensive if you pay each time you need to check on it if you’re doing it frequently.
Credit monitoring may also be helpful if you’re working to overcome debt so that you might be approved for some loans. These services will be able to provide experts to give you direction for paying off debt, while monitoring your credit. Make sure that you find an agency that uses your FICO score though, as not everyone does.
Finally, you might choose to use a service that monitors your credit if you have reason to suspect you’re at a high risk of identity theft. For example—your Social Security number has been compromised, etc. Though damage may have already been done, a monitoring service can catch it early and (hopefully) prevent it from happening again. Alternatively, you might consider spending your money on a credit freeze or issuing a 90 day fraud alert through a credit reporting agency. This can prevent new accounts from being opened in your name as well. In some places, victims of identity theft receive these services for free.
Jason Hartman recommends using your money toward investments that will make you money if you’re able. Spend money on credit monitoring only if you need to check your score often, need to improve or learn about your FICO score, or are at an elevated risk for identity theft. Assuming these extenuating circumstances don’t apply to you, keep your cash and start making money now! (http://www.flickr.com/photos/merydith/5045264623/)
* Read more from Young Wealth
The First Time Buyer’s Guide to Getting a Mortgage
The Real Cost of Pet Ownership
The Young Wealth Show Team