Financial fraud and scams are common in the US, and fraudsters and hackers use various online and offline methods to steal your information.
According to the Consumer Sentinel Network of the Federal Trade Commission (FTC), they received a staggering 2.4 million fraud reports in 2022. To put this number into perspective, it’s equivalent to approximately 6,575 reports daily, or around 274 reports every hour, 24/7, for an entire year.
I think we can all agree that’s a lot of reports.
Surprisingly, the number of fraud reports in 2022 actually decreased from 2021, which had 2.9 million reports. The number of reports doesn’t paint the entire picture, either.
Despite fewer reports in 2022, total fraud losses were higher at $8.8 billion, over a 44 percent increase from 2021’s reported losses of $6.1 billion.
With the prevalence of fraud, many Americans are turning to credit monitoring to protect their financial information.
What is credit monitoring, and how does it work? You’ve come to the right place for answers. This article will discuss everything you need to know about credit monitoring, including its purpose, limitations, and tips to protect yourself from fraud.
What is credit monitoring?
Credit monitoring means tracking your financial activity, credit history, and credit score as a proactive method of detecting fraud.
You can track your credit history yourself by requesting reports from the three primary credit bureaus: TransUnion, Equifax, and Experian.
Credit monitoring services can notify you of sudden and suspicious changes in your credit activity so that you can take the necessary steps to protect your information.
Here’s a scenario: A credit monitoring service notifies you that someone opened a checking account in your name at a Texas bank, but you live in California.
After receiving this notification, you can take the following steps to secure your identity and start resolving the issue.
1. Contact the bank to tell them the situation and ask them to close the fraudulent account.
2. Check your credit report for other questionable activity in case the credit monitoring service missed something.
3. Freeze your credit.
4. Contact the FTC to report the fraud.
5. Dispute any errors in your credit report with the corresponding credit bureaus.
Credit monitoring is helpful, but remember it’s not the be-all and end-all tool for safeguarding your information and preventing fraud. There are things that credit monitoring can and can’t do, and that’s what we’re doing to discuss next.
What can credit monitoring help you with?
As their name suggests, credit monitoring services monitor your credit from the three bureaus for unusual activity or sudden changes. Depending on your preferences, credit monitoring services will notify you of these activities in real-time by email, text message, or phone call.
Here are some activities that credit monitoring services can detect:
- Someone opens a new bank account in your name
- Multiple hard inquiries over a short period because someone is applying for credit cards in your name
- Requests to change information on your credit report, like your name or address
- Someone selling your personal information, including your name, bank account info, email addresses, passwords, and social security number
- Sudden changes to your credit score (a sharp decline)
- Large purchases that don’t fit your regular spending patterns, like if someone bought a brand new car in your name
What can’t credit monitoring help you with?
Credit monitoring services can detect suspicious activity on your credit report, but they can’t prevent said activity from happening.
If someone in another state opens a bank account in your name, your credit monitoring service cannot stop the transaction from taking place.
You’ll have to rectify the situation yourself by calling the bank in question and asking them to close the account.
Here are other things credit monitoring services can’t do:
- Stop someone from applying for credit cards in your name
- Prevent hackers from stealing your email addresses, passwords, and other login information
- Notify you that someone withdrew a large amount of money from your bank account (This is the responsibility of your bank’s fraud department.)
- Prevent data breaches on your accounts
- Prevent unauthorized credit card transactions, especially online (Again, this is the responsibility of your bank’s fraud department.)
- Prevent credit card skimming (electronically stealing your credit card details when you use an ATM or POS machine at a store)
- Report fraud (Contact the FTC to report the fraudulent activity.)
- Dispute credit report errors
- Freeze your credit (You must contact the three bureaus to freeze your credit with each of them.)
What are the advantages of credit monitoring? Why should I do it?
You might ask yourself: What’s the purpose of credit monitoring if it can’t stop fraud? Why should I even use a credit monitoring service?
It’s crucial to keep in mind that credit monitoring, by itself, isn’t a comprehensive fraud prevention tool.
However, it still offers the following benefits:
Proactivity
Credit monitoring provides a proactive approach to securing your information and preventing fraud. With credit monitoring services, you’ll know in real-time when something suspicious happens, letting you act immediately.
Think about it this way: Imagine someone opened an account in your name, and you weren’t using a credit monitoring service. How would you have known of the fraudulent activity?
Credit monitoring services give you peace of mind, knowing that if something suspicious appears on your credit report, you can catch it early. Once you receive an alert, you can take the steps necessary to protect your account.
Financial control
While credit monitoring is helpful for fraud detection, it offers more than that.
Credit monitoring services can alert you of changes to your credit score and the reasons why.
Your credit monitoring service will notify you whenever your score takes a hit due to some ill-considered transactions.
You’ll gain the insight you need to make better financial decisions in the future.
Did your score decrease because you missed consecutive payments on an expensive smartphone plan you could barely afford? You’ll know what to do next time to avoid unnecessary and unpleasant credit score hits that can have long-term ramifications.
Deed fraud detection
Deed fraud (or home title fraud) is when someone illegally transfers your home (or another property)
to their name without your knowledge or consent.
Criminals can do various things to profit from your property through deed fraud. They can sell your property and keep the money. They can also refinance your mortgage, converting the money into cash and pocketing it. This scam is particularly painful because it can leave you homeless.
If you think being a victim of this crime is excruciating, that’s because it is. Deed fraud is a felony in all 50 states and is punishable by imprisonment.
Some credit monitoring services can catch deed fraud early, letting you act quickly and take the following steps.
1. Get a certified copy of the forged deed to compare it with the original.
2. Consult your lawyer to help you prove you own the property
3. Contact law enforcement in the area of the property.
4. Report the fraud to the FTC.
You have to deal with a lot of paperwork if you ever become a victim of deed fraud, but credit monitoring can help ease the burden.
Paid or free credit monitoring?
Two types of credit monitoring are available:
1. Paid credit monitoring services
2. Free credit monitoring services
Paid credit monitoring is often more comprehensive, with some services offering access to all three credit bureaus. There are also paid credit monitoring services that provide identity theft insurance.
Some services, like Experian IdentityWorks, offer dark web surveillance. They will scan the dark web and alert you if a fraudster has posted your name, address, account details, and other sensitive information.
Costs vary by provider, but you can expect to shell out approximately $10 to $40 monthly for paid credit tracking services.
Free credit monitoring services are much less comprehensive than paid ones. You will also likely get access to only one credit bureau, but some may offer access to two credit bureaus.
There are banks and credit card companies that offer free limited credit monitoring if you’re a long-time customer, but it can depend on your relationship—it’s not guaranteed.
Other free credit monitoring services are more generous, providing free weekly credit score updates and personalized financial advice. You also get additional protection and sound advice when you use robo advisors like Robo-Advisor Pros. They offer financial planning, investment strategies, and other banking services to help you grow your wealth.
Which one is best for you?
A paid credit monitoring service isn’t necessarily better than a free one just because you’re paying for it.
Using paid credit tracking services is ideal if you have several assets and multiple accounts, including credit cards.
On the other hand, free credit monitoring will suffice if you’re just starting to build your credit and don’t have a lot of assets or accounts yet.
You don’t lose anything by signing up for free credit tracking, and upgrading to a paid subscription once you need it is easy.
How To Prevent Fraud on Your Accounts
Credit monitoring alone can’t prevent fraudulent activities. You also have to do your due diligence by taking the following precautions.
Freeze your credit
If someone opens an account in your name, freeze your credit to make your reports inaccessible, preventing more fraudulent activities.
Make sure you contact the three bureaus individually. Freezing your credit with one bureau doesn’t automatically freeze your credit with the other two.
Use password managers
Never write your usernames, passwords, and other login information on paper. It’s one of the biggest mistakes you can make when it comes to preventing fraud.
Use secure password managers to keep all your login information away from prying eyes. The beauty of this practice is that it won’t cost you anything because many free password management tools are available online.
Add layers of security to your accounts
Hackers and fraudsters are often intelligent and tech-savvy. It’s not enough that you use strong passwords for your accounts because dedicated and knowledgeable criminals can still find ways to break in.
Take advantage of additional security layers like multi-factor authentication (MFA) to protect your accounts further. Today, sites that store customer information generally offer MFA to users.
The perfect example is Amazon.
You can configure your account on Amazon to make the platform send you a one-time password (OTP) to your mobile phone. After entering your login details, you must also enter the OTP within the time limit to access your account.
Ignore fishy-looking emails
Never open emails from addresses you don’t recognize, nor click the links within them.
These are usually phishing emails that fool you into entering your information by showing you a legitimate-looking website or page.
You can often spot a fraudulent email quickly by looking at the sender’s email address. If the address looks like a random collection of characters, the message is fraudulent.
Another way you can tell an email is suspicious is if it’s asking you to do something that organizations would never ask you to do.
One of the most common email fraud tactics is sending account suspension or closure emails from various banks. These emails will ask you to enter your login details to prevent the closure of your bank account.
No US bank sends account closure notifications by email, and they will also never ask you for your login details via email.
Generally, banks are not even obligated to notify you before closing your account, regardless of the reason for closure. However, banks may send you a letter stating why they closed your account after the fact.
Shred documents containing sensitive information
Keep account statements in a secure place, like a locked safe, until after filing your taxes. Shred them once you no longer need them.
If you’re environmentally conscious and don’t want to waste all that paper, contact your bank and sign up for e-statements. Most, if not all, of the big US banks can send you your statements via email. With some banks charging customers for paper statements, signing up for e-statements can save you money in the long run.
It’s a win-win! You save the environment by not wasting all that paper and avoid paying paper statement fees that add up over time.
Detect Fraud Early. Start Monitoring Your Credit Today
The pervasiveness of fraud has made various detection and prevention measures more critical than ever. One of those measures is credit tracking.
Using the correct credit monitoring service can help you quickly detect suspicious activities in your credit report, like when someone fraudulently opens a bank account in your name or files requests to change your information.
While credit tracking can help you be more proactive about protecting your account and give you more financial control, its powers have limits.
Remember, credit monitoring can only detect fraud, not prevent it. You must also do your part to prevent illegal activities on your accounts and assets.
Whether to use free or paid credit monitoring services depends on your needs.
Paid credit tracking is worth it if you have a high credit score, multiple accounts, and several properties. Use free credit monitoring if you’re just starting your personal finance journey and are still building your credit.
