Tuesday, July 15, 2008

Why to avoid credit monitoring services

SmartMoney provides 4 reasons to avoid the so-called credit monitoring services.

On the surface, credit monitoring services sound like a foolproof way to insure your credit's health. But, as consumer advocates caution, these services typically aren't worth the money. "Credit monitoring is grossly overpriced," says Gail Hillebrand, senior attorney for Consumers Union, which publishes Consumer Reports. Adds John Ulzheimer, president of consumer education for financial-information web site Credit.com: "I can think of a lot of other ways to spend $150 a year."

Of course, credit bureaus argue that these services are worth every penny. "It's a good tool for managing credit, and that's what's missed in a lot of these conversations," says Steven Katz, a spokesman for TransUnion's TrueCredit.com. Rod Griffin, director of public education for Experian, says not only does their service give consumers around-the-clock access to their credit report, but they also provide invaluable debt management tools to help them improve their creditworthiness. Demitra Wilson, a spokeswoman for Equifax, noted that these services can also make a lot of sense for consumers who don't have the time to regularly check their credit report.

Of course the credit agencies' flacks say this. What should be required is for credit agencies to provide the monitoring service for free. Charging a fee so that a consumer can make sure the credit agency didn't @%@# up and put incorrect data into a credit report because of a mistake or identity theft. That's ridiculous. The burden of proof needs to be on the credit agencies and the companies that report credit data to them, not on the consumer. And I don't care about the cost of this regulation. Credit agencies are multi-billion dollar companies that have the resources to do this. The smart ones would figure out how satisfy the requirement cheaply. OK, enough ranting, let's talk about the reasons.

The story says that the services provide poor fraud protection, don't provide you with the same credit scores that lenders see, have loopholes in their identity theft insurance and (I think most importantly) individuals can monitor their own credit reports for free.

Do it yourself

As the article says, check one of your credit reports every 4 months. Use the free site annualcreditreport.com. DO NOT, DO NOT, DO NOT use another credit reporting site that purports to be free. You'll end up enrolled in some service that you get charged for, and you'll have to call up to cancel it. I try to set a schedule of checking Experian in January, Transunion in May, and Experian in September.