Credit reporting agencies (CRAs) compile personal and financial credit information on consumers. The compilation of this information is called a credit report. Monitoring your credit report can be useful for the detection of certain types of identity theft, particularly those that involve new or existing credit accounts. Such services are useful for detecting and disputing errors, which can affect your credit score.

With credit monitoring, you are notified by email, telephone or by mail when a CRA enters new information into your credit history. Notification provides an opportunity for you to monitor changes to your credit history. You can take action if the information is in error or suspicious as would be the case in an identity theft incident.

Credit histories are indexed by social security number (SSN) and name. Address, date of birth, employer and any variations of these used on credit applications are also recorded. An identity thief making an application for new credit will not likely use the consumer’s current address, which would trigger a credit monitoring notification (alert).

When a creditor or lender accesses a consumer report to review it for an application, this “credit inquiry” is recorded. A credit inquiry alert is an early signal of identity theft, specifically for new account fraud. Details on such accounts such as auto loans, credit cards and mortgages are reported regularly by the creditors to the CRAs. Information including the date the account was opened, the credit limit and payment history including delinquencies is recorded.

Any collections and some public record information, for example, bankruptcies, liens and judgments, foreclosures, and court proceedings related to debt and collections are recorded.

Changes in any credit history information may be an indication of identity theft.

An alternative to credit monitoring is the periodic manual review of credit reports. Consumers have the right to access their credit reports annually at no cost under federal law. However, the longer identity theft goes undetected, the more damage there may be to victims. Inspecting credit reports only annually or monthly increases the risks and liabilities to victims.

Consumer advocacy groups often advise consumers to access each (staggered by four months) of their three major credit reports (Equifax, Experian and TransUnion) annually rather than pay for credit monitoring services. But most consumers will do nothing, and even disciplined consumers may find it tedious to review their credit reports on a regular ongoing basis. In contrast, credit monitoring is continuous and consumers are only alerted when a change occurs to their credit report. If you can afford the services and have a busy lifestyle, consider them.

Numerous companies including the CRAs offer credit monitoring, which may be packaged with other services. Value is an important consideration when evaluating credit monitoring services. My favorite service, which I have owned and marketed for several years, monitors all three CRAs for the two adult family members for about half the cost of other services. Additionally, the service also provides a credit score, and of most value, identity theft restoration services if you become an identity theft victim.