Credit Monitors: A False Sense of Security
Credit-monitoring services are not all they're cracked up to be, the New York Times reported yesterday.
Credit monitoring has become a lucrative business for the big three credit reporting agencies and large banks as consumers try to protect themselves against identity theft. The big three typically sell consumer credit data to big banks for 20 cents to $1 per report, the Times reported. That same information -- your information -- can be repackaged and sold to you for credit-monitoring purposes for $3 to $16 per month. Wall Street analysts estimate credit monitoring is a $900 million business that will grow 20 percent a year or more.
More than 12 million Americans have signed up to be notified when lenders request their credit files. Credit monitoring is supposed to act as an early warning system. If you can't stop someone from using your identity to obtain credit, then at least you can find out about it sooner and contain the damage.
The Times story, however, focused on a major weakness in the credit-monitoring system that sellers of these services don't bother to mention in television commercials or online banner ads: The services don't work if someone uses your Social Security number to get credit in his or her name.
The story featured the travails of the Milletts, a couple from Overland Park, Kan., who subscribed to credit-monitoring services from all three major credit reporting bureaus: Experian, Equifax and TransUnion.
All three failed to alert them when an imposter used one of their Social Security numbers to apply for 26 credit cards, finance several cars and take out a home mortgage.
The problem arises because of the mismatch between the Social and the wrongdoer's name. The credit reporting bureaus route the loan request to another file, so even if it has your Social on it, it won't show up in your file.
Donald Girard, an Experian spokesman, admitted to the Times that his company's credit-monitoring products could not detect cases in which a credit applicant used someone else's Social Security number but his or her own name because those records are stored separately.
So where does this leave consumers?
As we've said here before, consumer groups generally see these services as a waste of money. You can monitor your credit yourself or ,depending on where you live, freeze your credit. Bankrate.com offers an easy-to-read comparison of five options, including credit-monitoring services.
Has a credit-monitoring service ever failed you?
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