Credit monitoring is a financial service offered to people who are concerned about fraud and identity theft. When someone uses this service, an agency keeps watch on that person's credit report and financial activities, looking for signs that unauthorized activity is occurring. In a sense, this could be considered the stepped-up version of checking one's credit report one or two times a year: instead of checking every six months, a monitoring agency checks all the time.
Financial experts disagree about the efficacy of credit monitoring. Some people feel that such services are extremely valuable, because while they cannot prevent fraud, they can catch it early, before it balloons into a major problem that could require months or years to fix. For people who have been victims of fraud in the past, it can also be a useful tool for security, making them feel more comfortable. Opponents argue that such services usually don't do anything that a consumer can't do, and that they may miss certain types of fraudulent activity.
When someone signs up for credit monitoring, the services included can vary. Some agencies simply keep an eye on the person's credit report, looking for tell-tale changes like the presence of new accounts or an emergence of unusual spending habits. Other services may cross reference, looking for all data linked with a person's name or identity number so that fraudulent accounts are identified even when they do not show up in a credit report.
Awareness of the fact that people routinely access their own credit reports has made fraudsters more cautious. Instead of opening an account with all of someone's information, a thief might use a false name and address and a real identity number. The account will be approved because it is linked with a real identity, but the account may not show up on a credit report because the name and address don't match. This type of account may slip through the cracks at a monitoring agency until collection activities begin and the account is traced back to the identity number linked with it.
Banks often offer credit monitoring to their patrons, usually for a fee, although sometimes it is free with top-tier accounts. It is also possible to secure the services of a monitoring agency independently. Identity fraud prevention and protection tends to offer more coverage than a basic plan, since it involves the active attempt to prevent identity theft rather than just passively monitoring a credit report.
