Credit Monitoring FAQ

Frequently Asked Questions about Credit Monitoring

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What is a credit report?

In the United States, credit files on individuals are kept by three different credit bureaus: Equifax, Experian and TransUnion. All three are private-sector, for-profit companies. The credit files they maintain contain extensive information on you and your credit history. This information is obtained mainly from lenders, creditors, insurers, employers and other institutions with which you may have a financial relationship. Any company that issues you any type of loan (such as a mortgage or car loan) or a credit card reports to at least one and often all three credit bureaus each month. These companies give the bureaus the latest status of your relationship with them, including your outstanding balance and whether or not you have been paying on time. The bureaus then keep all of this information in your credit file. Information about you is also obtained from public records. In addition, any time you apply for credit and a creditor requests your credit report from one of the bureaus (a "hard inquiry"), that information goes into your credit file as well. A credit report is simply a compilation of all the information contained in your credit file. Because not all lenders, employers, etc., report to all three bureaus, you actually have 3 different credit reports at any one time - one each from Equifax, Experian and TransUnion. Each credit report changes regularly as the credit bureaus receive new data.

Any time you are applying for new credit, such as in a credit card application, the creditor requests your credit report from one or more of the credit bureaus. The creditor then uses that information, along with your income and other data, to evaluate whether they want to offer you credit, and if so, how much. This type of request by a creditor for your credit report is known as a "hard inquiry" (as opposed to a "soft inquiry"). Hard inquiries themselves show up on your credit report and can affect your credit score. If the creditor does grant you credit, they then report back to the credit bureaus monthly, and the cycle continues.

What exactly is and is not included in my credit report?

Information that is included in your credit report:

Personal Information: Compiled from credit applications you've filled out over the years, this information typically includes your name and any previous names used, your current and previous addresses, telephone number(s), social security number, date of birth and current and previous employers.

Credit Information: This information mainly consists of specific account information from your current and past credit accounts, as well as accounts that list you as an authorized user. Account data includes the date each account was opened, the credit limit or amount of the loan, the payment terms, the balance, and monthly payment history. Most negative information (such as late payments) will remain on your credit report for seven years, while positive information can remain indefinitely.

Public Record Information: These are matters of public record obtained from government sources such as courts of law, and can include items such as bankruptcies, tax liens and overdue child support. Chapter 7 bankruptcy filings remain on your credit report for 10 years, while Chapter 13 filings remain for 7 years. Unpaid tax liens remain for 15 years or more if left unpaid, but only 7 years from the date the lien is paid. Most other public record information remains for 7 years.

Inquiries: Credit bureaus record a "hard inquiry" in your credit file any time a third party, such as a lender, credit card company or landlord, request your credit report in order to grant you credit. These hard inquiries are typically only made when you are requesting credit. If you have too many of these hard inquiries in a short period of time, it can negatively affect your credit score. Hard inquiries remain on your credit report for two years. A "soft inquiry" is when a lender requests your credit report for marketing purposes when you are not requesting credit, such as to offer you a preapproved credit offer. Soft inquiries do not affect your credit score and do not show up on credit reports given to third parties, although some credit bureaus will include them for informational purposes only on your own credit report that they provide to you.

Information that is not included in your credit report:

A credit report does not include any information about your checking, savings or brokerage accounts or any information that occurred outside the time limits described above. It also does not include any criminal records or information about race, religious preference, medical history, lifestyle, etc. Your credit score is not included in your credit report, but it is generated from information contained in your credit report.

Who can get access to my credit report?

Anyone with a "legitimate business need" can gain access to your credit report. This includes a very wide range of businesses. In most cases, they do not need your consent to get your credit report. Examples of types of companies that typically get access to your credit report are any creditors (such as credit card companies), lenders (such as mortgage lenders), employers and potential employers (but only with your consent), insurance companies, landlords, courts, those considering your application for a government license or benefit, state or local child support enforcement agencies, any government agency (limited usually to your name, address, former addresses, current and former employers), cell phone companies and utility companies.

What is a credit score?

Companies have built formulas to turn the information in your credit report into a number that represents how much of a credit risk you are. These numbers are called credit scores. Most credit scoring systems use the same numerical range which is between 300 and 850. A higher score is better, and indicates that you are less of a credit risk. The distribution of credit scores in the U.S. according to Fair Isaac, the company that produces FICO scores (the most widely used credit scores), is as shown below:

FICO Chart

Credit scores are an extremely important part of how lenders evaluate the likelihood that you will pay back your loan on time, but they also use other information when deciding whether to grant you credit and how much to grant you. While different creditors will evaluate scores differently and there are no hard and fast rules, some general guidelines for what scores mean are shown below. Keep in mind that other factors will also affect the type of credit you might be eligible for.

  • Over 750: Excellent - you should be eligible for any type of credit you want at the best rates
  • Around the 700's: Good - you should be eligible for almost any type of credit and will usually get the best rates
  • 670 or higher: Average - you will be able to get most types of credit, but will often not get the best rates or products
  • 620 or higher: Below average - you will still be able to get credit in many cases, but will have to pay higher interest rates than others
  • Below 620: Bad - you will have difficulty obtaining credit and when you get it, your rates will be high

Unfortunately, it is not as simple as each person having one credit score. Since the scores are calculated based on the information in your credit report and you have three different credit reports (one from each of the 3 credit bureaus), you know that you will have three different credit scores. Furthermore, there are a lot of different formulas to calculate credit scores. FICO is the most widely used formula but each of the credit bureaus also has their own formula, as do countless other companies. Many lenders with whom you have a relationship calculate a custom score based on the additional information they have about you outside of what is in your credit report. So for each different credit score formula, you will have 3 different credit scores. And since there are many different formulas, that means you will have lots of different credit scores. The credit scores you receive from the credit monitoring services reviewed at NextAdvisor.com are either FICO scores or the credit bureaus' scores. The service reviews indicate which type of score is offered. In general, it is best to get your FICO score, since that is the most common score used by lenders. However, the other types of scores are typically very similar to the FICO score. Also, keep in mind that as your credit report accumulates new information, that new data will be used to recalculate your score, so your score will also change over time.

Why does my credit report and credit score matter?

There are three primary reasons why your credit report and score can have a huge impact on your life. First, companies use it to decide whether or not they want to lend you money to buy a house or car, give you a credit card, lease you an apartment, give you a cell phone plan, give you cable without having to prepay, and countless other important decisions that have a huge impact on your quality of life. If you have a solid credit history as indicated by your credit report and credit score, chances are companies will be willing to work with you on all these services. If you do not, chances are you will have a hard time getting even the most basic services without having to pay for them in advance.

Second, companies use your credit report to decide the interest rates that they charge you on loans, on credit cards and on any other type of loan or credit you get. This means that having negative information on your credit report can literally cost you thousands of dollars a year. Lenders and creditors typically use a credit score to make these decisions, which is calculated from information on your credit report. Let's use an example. Say you are buying a house and want to get a $216,000 mortgage. If your credit score is over 760 (indicating excellent credit), your interest rate based on current rates would be around 5.86%, which on a 30-year fixed-rate mortgage would give you a monthly payment of $1,276. On the other hand, if your credit score was 630 (not very good but good enough to get a mortgage), your interest rate would be around 7.45%, giving you a monthly payment of $1,503. That's a difference of $227 per month, $2,724 per year and $81,720 over the life of the mortgage. Clearly, these are significant numbers. Of course, if your credit score was below 600, you would probably not be able to get a mortgage at all.

The third reason you need to know what's on your credit report is identity theft. Identity theft is one of the most common crimes today. In addition to monetary loss, victims of identity theft also suffer by having their credit histories decimated, leaving them with very low credit scores, unable to be offered any credit and even having current credit revoked. This can take months or years to fix and may never be entirely resolved. The first sign of identity theft is usually a change to your credit report, often a credit inquiry prompted by the thief trying to open an account in your name. If you subscribe to a credit monitoring service, you will be notified of any change to your credit report within 24 hours of the change and should be able to catch any suspicious activity before it results in fraudulent activity in your name.

What is credit monitoring and why do I need it?

Credit monitoring services track your credit file daily and alert you whenever there is a change. These services are great for making sure you stay on top of your credit and are even better for preventing identity theft. Since any new information on your credit report can affect your credit score and your ability to get credit, we highly recommend monitoring your credit for any changes or inaccuracies. Given the high cost of having negative information on your report, we think credit monitoring is a great idea. Correcting incorrect negative information on your credit report can significantly raise your credit score and literally save you thousands of dollars a year.

We think credit monitoring is even more important for preventing identity theft. Most identity thieves will attempt to open new accounts in your name. This will always result in a "hard inquiry" to at least one of the credit bureaus. Credit monitoring services alert you within 24 hours of any change to your credit report, including credit inquiries. Thus if an identity thief is attempting to open an account in your name, you would see an inquiry or perhaps several inquiries from lenders you are not requesting credit from. You can then follow up with the lender or with your credit monitoring service to stop the identity theft before any damage is done.

What type of credit monitoring should I get?

We highly recommend you get "three bureau" credit monitoring. "Three bureau" refers to the three credit bureaus: Equifax, Experian and TransUnion. It is important to monitor all three bureaus, and not just one, since changes to your credit report often occur at only one bureau. For example, a potential identity thief may apply for a credit card using your information. If that credit card issuer requests your credit report (a "hard inquiry") from the Equifax credit bureau, but you are only monitoring your TransUnion credit report, then you will never know. If you are going to go through the trouble and expense to get a credit monitoring service, we think it is silly to try to save a few dollars to get a solution that is incomplete and may not work. We believe you need a service that monitors all three credit bureaus so you can be sure to stop identity theft before it happens. We think it is also critical to monitor all three bureaus from a general credit management perspective. If erroneous negative information, such as a late payment, gets reported to Experian but you are only monitoring Equifax, you will not know that your credit has just been harmed and will not be able to correct it.

What is an "inquiry" and what is the difference between a hard inquiry and a soft inquiry?

Credit bureaus record a "hard inquiry" in your credit file any time a third party, such as a lender, credit card company or landlord, requests your credit report in order to grant you credit. These hard inquiries are typically only made when you are requesting credit. If you have too many of these hard inquiries in a short period of time, it can negatively affect your credit score. Hard inquiries remain on your credit report for two years. A "soft inquiry" occurs when a lender requests your credit report for marketing purposes, such as to offer you a preapproved credit offer. Soft inquiries do not affect your credit score and do not show up on credit reports given to third parties, although some bureaus will include them for informational purposes only on your own credit report that they provide to you.

Do I need to monitor both my credit report and my credit score?

We highly recommend it for most people but it depends on your situation. If you are only concerned about identity theft, then there is no real reason to monitor your credit score. However, if you have any interest in being granted credit (such as getting a mortgage, car loan or new credit card), we think it is very important to monitor your credit score, since it affects what type of credit you can get and how much interest you will have to pay. Needless to say, if you are considering getting a mortgage or refinancing a mortgage any time in the next year, we believe it is absolutely essential to monitor your credit score. Your credit report gives you the raw information that you can and should verify, but your credit score translates that information into a rating that potential lenders will use to evaluate you. Monitoring your credit score lets you see whether actions you are taking to improve your credit are actually working. If your credit score is too low and you want to get a mortgage or apply for any other type of loan, you may want to take action to improve your credit, then wait until your score rises before applying for credit.

Can't I get my credit report for free?

Yes. You can get one free credit report per year from each of the three credit bureaus at www.annualcreditreport.com. While getting one report from each bureau once a year may be useful in a few select situations, in general we do not believe that this is sufficient. Negative, incorrect or fraudulent information can be posted to your report at any time, and unless you are notified immediately, you will not be able to take actions to correct or repair your credit. Particularly in the case of identity theft, time is of the essence. You can learn more about AnnualCreditReport.com here.

How can I correct information on my credit report?

You will need to submit a dispute request to each of the credit bureaus that lists inaccurate information on your credit report. In many cases you can do this online. Click on the name of the bureau below for more information on their credit report dispute process:

Experian
Equifax
TransUnion.

Which credit monitoring services offer assistance in Spanish?

We contacted each of the credit monitoring services to find out which services offer assistance in Spanish — as well as English — and found out that all of our reviewed services that offer both identity theft protection and credit monitoring also offer assistance in Spanish.

Here is how to connect to the Spanish-speaking representatives:

Identity Guard: To reach a Spanish-speaking representative of our top-rated credit monitoring and identity theft protection service, just call the main customer service line and select number one/option one on the phone from the home menu. Next select number two/option two on your phone and you'll be connected to a Spanish-speaking representative.

Equifax: Just call the main customer service number for Equifax and select the number two/option two, and you'll be connected to a Spanish-speaking representative.

For these services — Privacy Guard, TrustedID, SmarterCredit, Lifelock®, ProtectMyID.com — just call the main customer service line and ask to be connected to a Spanish-speaking representative.

Do my spouse and I each need separate credit monitoring services? Is there a discount for married couples?

Since the credit bureaus do not merge the credit reports of married couples, you and your spouse will each have your own, individual credit report. While certain accounts and information will most likely overlap, appearing on both reports, much of your credit history will differ. This means that you will each need your own report in order to get a clear picture of your current credit health. This is important because should an identity thief attempt to open new accounts in your name, it would only be reflected on your report. Likewise, should a thief attempt to open an account in your spouse's name, it would only be reflected on your spouse's report.

How do I cancel my credit monitoring service?

Most of the credit monitoring services reviewed on NextAdvisor.com offer a 7 or 30 day free trial. One benefit of these free trials is that they effectively allow customers to receive credit reports and scores for free, and then cancel before the trial period has ended. If this is your intention, you should be aware that you will have to enter your credit card information in order to take advantage of one of these free trials. Your credit card will not be charged until the end of the trial period. If you do decide you cancel, simply call the customer service department of the credit monitoring service that you selected.

However, you should bear in mind that a one time credit report and score will not be effective in protecting you from identity theft, since fraudulent account activity could occur at any time. Our top ranked credit monitoring services are excellent and reasonably priced, and will alert you immediately if there are any changes to your reports. We hope that you would consider continuing this valuable service, but if you do choose to cancel, it will be a quick and easy process.

If I get a copy of my credit report, or sign up for credit monitoring, does it hurt my credit score?

No. Requesting a copy of your credit report will not negatively impact your credit score. Neither will subscribing to a credit monitoring service. When you authorize a lender to check your credit, it is called a "hard pull," which may cause your credit score to drop slightly. However, when you check your own credit, this is known as a "soft pull," which does not hurt your score. You can check your own credit report and score as frequently as you like without consequences.

I only want to see my credit score. Can't I just pay a one time fee for this?

Yes, it is possible to purchase your credit score one time for a fee. There is no single way to calculate a credit score, but the FICO® Score is the one most commonly used by lenders, and is the best score to purchase if you want to know how lenders view your credit file. The company that creates the FICO® Scores for all three credit bureaus, myFICO, also sells Equifax and TransUnion FICO scores directly to consumers. Because of a dispute with Experian, there is no way to get your Experian FICO® Score. You can buy either one or both of your FICO® Scores for $19.95 each through myFICO's FICO® Standard. Each FICO® Score also includes the corresponding credit report or reports, an explanation of your credit score or scores, and the FICO Simulator, which estimates what your score would be if you took various actions, such as paying down credit card debt.

However, you should take into account the fact that your credit file is constantly changing. This means that your credit score is always changing as well. As such, we recommend that consumers check their credit report and credit scores at least once per quarter and more frequently if you are actively shopping for a loan. We also recommend that you receive your credit reports at the same time as your scores because the information on your credit report is what is used to determine your credit score in the first place, and is generally far more important than the score itself. See our credit monitoring reviews if you want to keep regular tabs on your credit score and report.

Can I get my credit report without a credit card?

You are entitled to one credit report per year from each of the three credit bureaus, which you can get for free at www.annualcreditreport.com, without a credit card. While getting one report from each bureau once a year is nice, we don't believe it is all that useful. Negative information getting posted to your report or identity theft can happen at any time and you will suffer the consequences unless you are notified and can act immediately. There is no way to get your credit score for free.

If you wish to purchase a credit report or subscribe to a credit monitoring service online, you will generally need either a credit card or debit card. Using debit cards to make purchases online is riskier, though, since the money is coming directly out of your account. If you plan on making any purchases over the Internet, having a credit card is essential.

How did NextAdvisor review these credit monitoring services?

We thoroughly researched the leading credit monitoring services by signing up for them and then testing the available features. In addition, we researched each provider reading related news and third-party research reports.

After our initial tests, we continue to use all the services and update our reviews as situations change. We also monitor the providers' sites for any service changes or specials.

We only include providers on our site that we believe offer a good value proposition. If there is a provider you know of that is not on our site, you can be fairly certain we did not rate that provider highly enough to include in our comparison. If you think we are missing a quality provider or have any other suggestions or comments, please visit our contact us page.

Top Credit Monitoring

Rating:

Bottom line: Most comprehensive & best overall service we have reviewed; All 3 credit scores free; $3 discount & free 30-day trial
Rating:

Bottom line: All 3 credit scores free; monthly credit updates plus other benefits; 25% discount & free 30-day trial
Rating:

Bottom line: All 3 credit scores and 3-bureau credit report for $1; monthly credit score and report updates and excellent identity theft protection; 25% discount & $1 30-day trial
Rating:

Bottom line: Daily updated Experian credit scores, plus quarterly 3-bureau reports and scores; excellent identity theft protection and credit monitoring; 30-day free trial (monthly) or 2 months free (annual membership)
Rating:

Bottom line: All 3 credit scores, excellent ID protection; 10% discount for the first year
Rating:

Bottom line: 3-bureau monitoring and real FICO scores; FICO score updates anytime a change is detected at a bureau; no free trial; more expensive than comparable services
Rating:

Bottom line: Provides Equifax and TransUnion credit scores, credit reports and daily credit monitoring for free, but uses your personal information to sell you credit card offers
Rating:

Bottom line: 3-bureau monitoring, unlimited TransUnion scores

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