- Credit monitoring can help you identify and correct errors and fraudulent activity, thereby improving your credit score.
- With MoneyLion, you’ll also be able to see how changes could potentially impact your credit score, before they occur, which can help you and your family stick to your budget.
- Credit monitoring doesn’t have to be expensive; there are plenty of free services. Look for value in essential features like real-time monitoring, score tracking, and positive company reputation.
Credit monitoring is just what it sounds like: Periodically checking your credit reports to make sure they contain accurate information—and to ensure they don’t contain any fraudulent activity.
Does this sound like a snooze-fest? The good news is that there are hundreds of different services available that can monitor your credit, so you don’t have to. Just live your life, and they'll do the rest.
Here, we’ll outline three different benefits that can help keep your financial house in order.
1. Credit Monitoring Can Optimize Your Credit Score
There’s no reason to bore you to tears with the details, but perhaps the easiest way to think of your credit score is that it’s a number used to determine your likelihood of repaying loans on time.
The higher your credit score, the more likely you are to repay, which means you’ll be assigned a lower interest rate. Consequently, your monthly payments will be lower and you’ll pay less interest over the life of the loan.
In other words, whether you’re applying for a credit card, an insurance policy, a mortgage, or any other type of loan, your credit score will almost certainly play a big role in how much you pay each month.
In this respect, credit monitoring services can help ensure you don’t have any errors or fraudulent activity on your credit reports that could lower your score. And if you do, you’ll be able to address them and potentially increase, or maintain, your score.
After all, it’s reported that 10% of Americans have been the victim of credit card fraud, and in 2013, the FTC found that 5% of consumers had errors on one of their three major credit reports, which could lead to paying more when you get a loan!
Pro tip: Just keep in mind that credit monitoring services can only report on fraudulent activity like ID theft; they can’t prevent it from occurring in the first place. To accomplish this, you’d need to contact each reporting agency (TransUnion, Experian, and Equifax) and set up a fraud alert, which means no new credit can be issued without a verification process.
Finally, MoneyLion’s free credit monitoring can also help you understand more about your credit score by rating you on factors like on-time payments, credit age, utilization, and number of accounts.
2. Credit Monitoring Can Help You Plan Your Finances In Advance
Speaking of which, there are hundreds of factors that could negatively impact your credit score and impact your budget. Some of these, like skipping a payment or increasing your total balance owed, are fairly obvious.
Others, though, such as adding credit inquiries (when shopping for a new mortgage or a credit card, for example) and closing an account, might not be so evident.
MoneyLion’s Credit Simulator Tool also gives you the opportunity to find out just how your credit score will be impacted across a dozen different actions, including:
- Adding a credit card, loan, or credit inquiry
- Increasing limits or balances, or transferring balances to a new card
- Paying off credit cards or missing a payment
- Adding public records like a tax lien, foreclosure, child support, or wage garnishment
In short, a reliable credit monitoring service can help boost your financial literacy.
3. Credit Monitoring Doesn’t Have to Be Expensive: Tips for Choosing the Right One
While there are clearly a number of benefits related to credit monitoring services, it’s important to point out that not all are the same.
Perhaps the biggest difference is whether you want to choose a free service, or hand over your hard-earned money for one.
In the end, it comes down to value for your time and money. As a result, you’ll want to focus on essential features like:
- Real-time monitoring, including score
- The ability to track your credit score over time, so you can see if it’s getting better or worse
- A breakdown of what factors impact your score and where you stand in relation to those factors
- Backed by a company with years in business, with deep expertise in the financial field. Don’t forget mostly positive online customer feedback!
In the end, credit monitoring services—especially free ones that are loaded with features from reputable companies—can have a positive impact on your financial future. Just follow these tips to find the right one that matches your needs.
Derek Lakin is Senior Editor at HighYa.com, where he helps empower and inform consumers about a wide range of topics, personal finance, health, new tech, and insurance.