Z-Guide: Credit Monitoring: Why and How?

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Welcome to Z-Guides, where we take the daunting world of credit and make it as approachable as a cozy cup of coffee on a chilly day. Over a series of 8 blogs, we're going to break down everything you need to know about credit, from the basics to the nitty-gritty details.

Whether you're a seasoned credit card pro or just starting your credit journey, this is Credit Education 101 - and we're here to guide you through it. This blog takes you through a crash course on why credit monitoring is essential and how to do it like a pro.

So grab a seat, get comfortable, and dive into the world of credit together.

Credit Monitoring: What it is and why it matters

If you've ever applied for a loan, credit card, or mortgage, you are aware that your credit score plays a vital role in determining whether you get approved and what interest rate you'll pay. A good credit score can save you money and help you achieve your financial goals. But how can you keep track of your credit score and make sure it's accurate? That's where credit monitoring comes in.

Credit monitoring is a service that tracks your credit report for any changes or suspicious activity. Your credit report is a record of your credit history, including your loans, credit cards, and payment history. Credit monitoring services alert you to changes in your credit report, such as new accounts opened in your name, missed payments, or fraudulent activity.

Why is it Important for Me in Today's Times?

In today's digital age, where data breaches and identity theft are too common, credit monitoring has become increasingly important. Hackers can steal your personal information, and use it to open accounts in your name or make unauthorized purchases. Without credit monitoring, you might not know that your credit score has been affected until it's too late.

Credit monitoring also helps you identify errors in your credit report. Mistakes on your credit report can lower your credit score and make it harder to get approved for credit. With credit monitoring, you can catch errors early and dispute them with the credit bureaus.

What All is Covered When I Monitor Your Credit?

When you monitor your credit, you can keep track of several aspects of your credit report, including:

  • New accounts opened in your name
  • Credit inquiries (requests for your credit report)
  • Late payments or missed payments
  • Changes in your credit limits or balances
  • Public records (such as bankruptcies or liens)

What All Does Credit Monitoring Not Cover?

Credit monitoring is not foolproof and does not provide complete protection against identity theft. Credit monitoring services can only detect changes in your credit report, not prevent them. If someone steals your identity and opens new accounts in your name, credit monitoring can help you catch it early, but it won't stop the fraud from happening in the first place. Hence, you must request for a credit report once in a while to stay on top your credit and personal finances.

Does Credit Monitoring Hurt My Credit Score?

No, credit monitoring does not hurt your credit score. Checking your credit report or score is considered a "soft inquiry" and does not impact your credit score. However, applying for new credit or loans, which requires a "hard inquiry" into your credit report, can temporarily lower your credit score.

Want to Read Up More? Some Resources for Reading on credit monitoring

There are several credit monitoring services available, both paid and free. Here are five popular options:

  1. Credit Karma: This free service provides access to your credit scores and reports from TransUnion and Equifax, as well as credit monitoring alerts.
  2. Experian: Experian offers a free credit monitoring service that includes alerts for new accounts, credit inquiries, and changes to your credit report.
  3. IdentityForce: This paid service offers credit monitoring, identity theft protection, and alerts for suspicious activity on your accounts.
  4. myFICO: myFICO is a paid service that provides access to your FICO credit scores and credit monitoring alerts.
  5. TransUnion: TransUnion offers a credit monitoring service that includes alerts for changes to your credit report and access to your credit score.

Read Up Enough? Time to Take Action

Next, in the Z-Guides series: How to manage and minimize your debt. Stay tuned!