4 Reasons to Forgo Credit Monitoring Services

KEEPING A CLEAN credit record is imperative these days. Unfortunately, the task of ensuring one's credit record remains fraud-, identity theft- and mistake-free, can feel like a next-to-impossible feat.

That's where credit-monitoring services come in — they promise to do all the legwork for you. For $10 to $15 a month, these services, which are offered by credit reporting bureaus, banks and other third-party companies, provide customers with unlimited access to their credit report and score, plus e-mail notifications should any significant changes occur (be it a late payment or a new account opened in your name). Some even vow to reimburse for losses incurred fighting identity theft.

On the surface, credit monitoring services sound like a foolproof way to insure your credit's health. But, as consumer advocates caution, these services typically aren't worth the money. "Credit monitoring is grossly overpriced," says Gail Hillebrand, senior attorney for Consumers Union, which publishes Consumer Reports. Adds John Ulzheimer, president of consumer education for financial-information web site Credit.com: "I can think of a lot of other ways to spend $150 a year."

Of course, credit bureaus argue that these services are worth every penny. "It's a good tool for managing credit, and that's what's missed in a lot of these conversations," says Steven Katz, a spokesman for TransUnion's TrueCredit.com. Rod Griffin, director of public education for Experian, says not only does their service give consumers around-the-clock access to their credit report, but they also provide invaluable debt management tools to help them improve their creditworthiness. Demitra Wilson, a spokeswoman for Equifax, noted that these services can also make a lot of sense for consumers who don't have the time to regularly check their credit report.

Yet, while a select few subscribers may indeed benefit, such services are overwhelmingly a waste of cash, says Hillebrand. "You could spend your money better, on cheaper and more effective protections," she says. Here are four reasons why signing up for a credit monitoring service isn't worthwhile for most consumers:

Consumers who want to protect themselves against identity theft (or who've fallen victim to it in the past), should consider a more effective and cheaper solution: freezing their credit report. "It's like putting a lock on the door of your credit file," says Hillebrand. For up to $10 per credit bureau (the amount depends on your state) this service prevents new lenders from looking at a report. Since lenders typically don't issue new credit without assessing a borrower's history first, the service serves to prevent identity thieves from opening an account under your name. The catch: neither can you, unless you temporarily unfreeze your account (Click here for details.)

Another way to protect against identity theft is to ask the three credit bureaus to post a free fraud alert on your account for 90 days. This renewable alert warns lenders to confirm your identity before issuing new credit.