The Credit Monitoring Ripoff

What is Credit Monitoring?

From Consumersunion.org:

Consumer credit reporting agencies offer to "monitor" your credit for a fee. Credit monitoring services can be costly. These services cost anywhere between $43.80 per year to nearly $150.00 per year depending upon the provider. Typically, these services say they will notify you if anything unusual or suspicious appears on your consumer credit report.

And most importantly:

Don't bother with credit-monitoring services.

They go on to explain how to monitor your own credit, which is fine, but not the focus of this article.

Why It's a Ripoff

Credit reporting companies have found a gem in "credit monitoring". They have your credit data and sell it to just about anyone and everyone that comes along. But there's a problem. ID Theft is rampant and people are getting tired of it.

Enter "credit monitoring" (angelic chorus plays). The nice, consumer friendly credit companies are helping to solve the problem! See? We'll monitor your file and let you know as soon as something looks suspicious. All for a low (or not so low) fee…

Hmm. There's a few problems with this.

• It doesn't stop ID theft, it just let's you know that it's happening faster than you would otherwise.
• It's worse than insurance - At least with Insurance, you can control your level of risk. For example, if you don't drive much, your risk of an accident is much lower than someone who delivers pizzas. But you have no way to know if you are at more or less risk for ID theft. So you'll pay and pay and might never see any benefit from the money lost.
• There's a free alternative available - With the new law requireing that the credit companies give you one free credit report per year, if you stagger them to get one every three months, you will be able to constantly see your credit report anyway. While this is not as good as monitoring would be, it's better than paying $150 or more per year for the "service". Remember that there is only ONE legitimate site to get your free reports!
• It's a type of fear-based extortion - The credit companies are the reason the problem exists in the first place, but they will let you pay them "protection money" to stop it. Oh wait, they don't stop anything. That's right, now you're paying them protection money, but they don't protect you (If at this point you want to point out the ID Theft insurance included with the plan, don't even bother).
• Credit monitoring is big money - Did you every wonder why there are SO many outlets for credit monitoring? Here's a hint: why were there so many outlets for home-equity loans? Because people are making money hand over fist on it. Any time you see some financial service that seems to have a million knockoffs seemingly overnight, (e.g. payday loans), you can bet that something is wrong.
• They charge WAY too much for the service - So you get an e-mail any time your credit file changes. There's almost no cost associated with this! If you subscribe to the RSS feed off this site, then any time I make an update to this page, you will know. What does it cost me? Nothing. What does it cost you? Nothing.
• It's not necessary if you live in a state that allows credit freezes - There is nothing, NOTHING that credit monitoring buys you if you have a credit freeze on your account (as long as your personal password hasn't been compromised). That's because without your personal password that you use to thaw your account, no one can get access to your credit file.

Someone in the credit companies pitched this idea to management and was immediately given a corner office and a ferrari.