Your credit rating plays a large role in determining whether you can purchase a car or home and whether you can obtain credit cards. The three main credit bureaus -- TransUnion, Experian and Equifax -- produce credit reports, and they offer credit monitoring to consumers interested in that service. A credit report is different from credit monitoring.
Credit Report
A credit report is a snapshot of all activity relating to your credit. A report typically shows your personal identifying information, credit inquiries, credit accounts, negative and positive credit marks and your loan and credit balances, among other things. The accuracy of your credit report at a given time depends upon how often a lender updates the credit bureau about your information and how accurately the credit bureau lists that information to your report. The U.S. Public Interest Research Group reports that about 80 percent of credit reports in 2004 contained errors, according to Bankrate. You can obtain a free copy of your credit report once each year by going through the AnnualCreditReport.com website.
Credit Monitoring
Credit monitoring is available for a fee from the three main credit bureaus and some other companies. When your credit report changes, the bureau automatically emails you an alert. Changes in your credit report include things such as credit inquiries, loan or credit payoffs or the acquisition of a new loan or credit card. The primary purpose of credit monitoring's is to detect identity theft. For example, if there is an inquiry on your report for a credit card for which you did not apply, you can contact the credit bureau to notify it of the error, which could signify identity theft. The sooner you address an identity theft issue, the sooner you can resolve it. Enrolling in credit monitoring also may enable you to review your credit report, depending on the bureau and the plan you selected. Credit monitoring requires a recurring fee, usually in monthly payments.
Lenders Who Don't Report
Both credit reports and credit monitoring suffer from one primary problem: Charges to your credit depend upon lenders who report your credit information. While most lenders make timely updates to the credit bureaus, some only update the bureaus if you fall behind on your payments. If lenders don't update your information, your credit score won't change and you may not receive alerts that could indicate identity theft.
Different Information
Lenders that report your information to the credit bureaus don't always update all three bureaus. For example, your bank may notify only TransUnion and Experian that you paid off a loan. Your credit report with Equifax would not include that data, and its credit monitoring might not detect that significant change in your credit status. Most bureaus offer plans that monitor and release credit reports from all three bureaus, but fees for that service may be higher.
What to Choose
Many bureaus offer plans that combine credit reports and credit monitoring, although you'll pay more than if you purchased just one plan. If you're satisfied receiving a credit report from each credit bureau once per year, you don't need to purchase anything, because you can obtain your credit reports through AnnualCreditReport.com. You also can purchase plans to receive credit reports and credit scores from the credit bureaus at any time. If you are concerned about identity theft and are willing to pay a fee to be updated about any changes to your credit report, you should purchase a credit monitoring plan from one of the credit bureaus or one of several other online outlets that offers that service. Be aware of the details of the monitoring service's payment plan to avoid paying for services you don't want or need. Often these services require you to provide a credit card number, and they automatically charge your credit card account monthly.
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