The average cost of monitoring all three credit reports and scores is $30 a month. ($360 a year). Now, with a hefty yearly cost like that, I have to wonder, are these companies really providing a service that valuable? Do I really need to know my credit score every month?

The answer to that is going to depend on your goals and your credit history. This is an excellent example of how past mistakes on your credit report can come back to bite you in the wallet. Now, I think most of us are automatically going to agree that this is a pretty poor way to spend $360 a year. However, there are certain circumstances where you absolutely should be paying for this service. In other words, under certain conditions, credit does win over finances.

Let’s take a quick look at when it would actually benefit you to pay for a credit monitoring service.

1) If you suspect your identity has been stolen, and you do not want to freeze your credit report - In this case, monitoring your credit reports for 3 to 6 months would be a wise idea because it will allow you to quickly see if anyone else is opening accounts in your name.

If my identity was stolen, I would freeze my report for 3 - 6 months. Then, after I un-froze it, I would place a fraud alert and purchase a monitoring service for an additional 3 - 6 months just to be on the safe side. In this case, you could probably skip purchasing your credit scores, and just view your reports. This would save some money.

2) If you are trying to repair your credit after a default, judgement, or bankruptcy - Purchasing a credit monitoring service is especially important after bankruptcy because you will need to be sure that companies whose debt was covered under the bankruptcy do not continue reporting negatively after your bankruptcy is discharged.

3) To make sure your “credit repair” credit cards are reporting properly to all three credit bureaus each month. Let’s face it, repairing your credit is an expensive proposition. Secured credit cards require money up front. Unsecured credit cards for people with bad credit often have high yearly fees, application fees, monthly fees, and even more fees when they raise your limit. Not to mention high interest rates if you dare to leave a revolving balance.

So, if you are going to all the trouble of paying for these types of things to repair your credit, then it makes sense to go the final mile and monitor your reports and scores. That is the only way to know whether or not your score is actually going up, and by how much.

One other thing - depending on how low your score was, it could take some time to raise it. Monitoring helps you track your progress, and pick your next course of action. Finally hit above 700? You can qualify for better deals, maybe even to refinance your high interest cards and loans. Above 720? Even more likely.

By paying to monitor your score regularly, you will prevent needless inquiries on your report. (Whoops, sorry, your score is 680 at Experian, not 700…Denied…) Monitoring will save time, and give you the confidence you need to go apply for better deals as you qualify for them.

For a breakdown of the different credit score categories, you can click here (It’s in the middle of the article.)

What do you think? Is using a credit monitoring service important for people with excellent credit too, or just those trying to repair their credit?

Have a question for us? Leave a comment below!

This entry was posted on Wednesday, July 2nd, 2008 at 8:45 am and is filed under Credit Reports and Scores, Tips and Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.