Why Credit Monitoring Matters

27 October 2014

Some people believe that saving and spending responsibly is enough to stave off financial troubles. However, there is more you can do you protect your hard-earned money. Credit monitoring, for instance, is one easy-to-implement and invaluable tool that everyone should be taking advantage of.

A credit monitoring service watches your credit report and will promptly notify you to certain changes. It's crucial to react quickly to identity theft and fraud, and monitoring your credit report allows you to do exactly that. Credit monitoring services will alert you when a new credit inquiry is made, when credit accounts are opened or closed or if your home address is changed.

The inquiry alerts will tell you who has requested a copy of your credit report such as landlords, employers, or companies you're doing business with such as a utility or phone service. Alerts concerning changes to the accounts in your file will let you know if a new account has been opened, or if an existing account has been closed. Address change alerts could indicate that a fraudster is diverting your mail to another location in order to access your accounts through the bills you receive in the mail. In all of these cases, the activity detected might be legitimate but just in case you weren't expecting thee change, prompt notifications can help you to take action quickly before the identity thief can do too much damage. Once you have been made aware of changes to your credit file, you can then request a copy of your credit report and review the transactions thoroughly. If you determine there is fraudulent activity on your account, you should report it to the credit bureaus immediately. You can also request that the bureaus place a credit freeze on your file so that criminals can't continue to open accounts in your name.

Maintaining a clean credit history is important because the information in your credit file is used to create your credit score. Your credit score is what lenders use to determine your credit worthiness and it will impact how expensive your loans and mortgages will be. It is calculated based on the activity in your file such as, paying off a loan, falling behind on your credit card bills, or opening a new account. These types of actions can either improve or lower your credit score. It may not seem to make much of a difference now, but a person with excellent credit can save much more with better interest rates than a person with poor credit.

There are two national credit bureaus in Canada: Equifax Canada and TransUnion Canada. Both will provide you with a free copy of your report by mail but that won't give you the around the clock monitoring and alerts that a credit monitoring service will provide. While both bureaus report similar activity, they may not always detect the same information at the same time. So if you're only checking one report at a time you could easily miss an error that only appears in the other report. Or if you go a long time without reviewing your report, you could be giving identity thieves valuable time to do further harm and the longer it goes on the harder it can be to clean up.

While credit monitoring services can't guarantee you won't become the target of identity thieves, they will alert you to activity early on. Once you are aware, you can take action to stop criminals from running up debt under your name, preventing serious damage to your credit. Ultimately, it's up to you to educate and protect yourself, and a credit monitoring service can help you keep an eye out and give you some peace of mind.