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Credit Report Monitoring - Do You Need It?

I read an interesting piece in an article in Time Magazine about 5 things you should never buy in a store.  It included unlimited cell phone minutes, bottled water,  and alternative flu remedies.  It of course cautioned that there are exceptions to the rules.  For instance, despite the reports that most bottled water is simply modified tap water, it would be preferred to the tap water in a foreign country where the water system is in question. 

This got me thinking about consumer services and whether these are things we should spend out money on.  Are credit monitoring services something we should be investing in, or is this one of those things that sound like a very helpful consumer product, but is actually entirely unnecessary?

The argument against the need for it would be that the rights we all have under the Fair Credit Reporting Act truly rule out the real need to spend money on such a service.  Under the Fair Credit Reporting Act, we all have certain rights that, if properly followed, can sufficiently protect our credit rating without the need to spend additional funds on a monitoring service.  First, there is the right to obtain a free credit report once a year from each credit reporting agency .  Without once extra cent, you can contact each of the three credit reporting agencies and obtain your report once every 12 month period.  In addition, should you get denied credit, or have a current creditor take adverse action against you, you have the right to a free report.  Otherwise, the expense to purchase one more report  throughout the year is relatively cheap.  I have seen all three credit reporting agencies in a 3 in 1 for as low as $12.95 on line.  So in sum, you can see your credit report once every six months for under $13.00 for the whole year.  From my research on line, some of the more highly touted credit monitoring services are $15.00 per month. 

Should we find out that our credit report contains inaccurate and harmful information, the Fair Credit Reporting Act provides for a consumer's right to have the creditors and the credit reporting agencies perform a prompt investigation into the inaccuracy and report the results within 30 days.  We have covered this in previous articles. To read those articles, click here

Regardless of whether you learn of a problem with your credit through a monitoring service or from your own regular reviews of your credit report, this 30 day dispute process is a must in order to fully protect your rights under the FCRA.   Under the FCRA, you cannot recover for losses incurred prior to your dispute (unless you have evidence that the credit bureaus had some other form of notice that the account on your report was inaccurate).  If you have no plans on applying for credit in the immediate future, having a credit monitoring service would have done you no good here. 

There is good argument for the need for these services.  A credit monitoring service is good for:
>People who anticipate a need for their credit in the near future for a significant purpose such as a home refinance or auto purchase.  If you are planning on refinancing a mortgage, buying a car, renting an apartment, then you want to prepare.  A monitoring service can tell you how your score looks now, what you need to improve it, and what steps you can take over the next few months.  In addition, if something pops on your report, you would want to know about it immediately so it can be tackled right away.
>True identity theft victims.  By "true" victims, I mean that the persons identity was severely compromised by a stranger that has been opening multiple accounts in another's name.  This is a dangerous situation where large amounts of money can be effectively stolen in a relatively short period of time.  A monitoring service would alert to each and every breach. 

The rest of us, those who do not have major transactions ahead wherein a high score is a must, really should not have to spend the extra money.  The Fair Credit Reporting Act, and proper utilization of your rights thereunder, can be a sufficient monitoring tool.

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