Credit Monitoring

Credit monitoring is a service that tracks your credit report for any changes or updates, alerting you to new accounts, inquiries, or significant fluctuations in your credit score. For example, if you notice a new credit inquiry that you did not authorize, you can take immediate action to address potential identity theft. Credit monitoring can be especially useful if you're planning to make a major purchase, like a home or car, where your credit score can significantly impact loan terms.

Many people mistakenly believe that credit monitoring will directly improve their credit score. While it doesn't change your score, it provides valuable insights and notifications that can help you manage your credit profile more effectively. For instance, if you monitor your credit and see a drop from 750 to 700, you can investigate the cause, which might be due to an increase in credit utilization or missed payments. This proactive approach can save you money in the long run, as even a small change in your score can affect interest rates by as much as 1% on a $200,000 mortgage, costing you approximately $40,000 over 30 years.

To get started, consider signing up for a credit monitoring service that suits your needs—many offer free trials or low-cost monthly subscriptions. Key takeaways include regularly checking your credit report for inaccuracies, understanding your credit utilization ratio, and taking advantage of alerts for suspicious activity. By staying informed, you can protect your financial health and make better credit decisions.