Credit Watch

What Is Credit Watch?

Credit watch refers to a variety of special programs offered by credit rating agencies and financial institutions to monitor an individual's credit report for any credit-related changes, also known as credit monitoring services. The individual is notified of these changes which allows the person to act on any red flags before they can have a detrimental effect on credit score or credit history if the activity is fraudulent. Subscribing to such a service can also be used as a form of protection against identity theft.

How Credit Watch Works

A credit watch service tracks changes in borrower behavior in order to notify consumers of potential fraud, as well as changes to their creditworthiness. While these are increasingly available for free, several of them still are fee-based services. Most of the credit watch paid services will notify the individual within a business day whenever a credit application is made and shows up on your credit report. The intent of this service is to alert individuals of changes to their credit reports. These updates make it easier to determine whether personal information has been compromised.

Pricing and features vary from service to service. Some financial institutions offer free services that track credit scores on a limited basis, while other paid services may offer more comprehensive scans across the internet for a consumer’s bank account, credit card or Social Security numbers. When researching credit monitoring services, consumers should take time to understand their limitations. Paid services may offer more comprehensive coverage than free services, but cost does not automatically translate to superior services in all cases. While many services may offer access to a consumer’s credit score, they may not track that score across all providers, for example. Some credit card issuers provide free access to a consumer’s credit scores, making a second paid service that does not offer additional features superfluous.

Credit Watch and Identity Theft

While credit watch services can provide early warning of identify theft or fraud, for the most part they offer protection only after the fact. These services work best as part of a broader strategy to protect and monitor personal information that bad actors could use to commit fraud. In particular, consumers should remain vigilant about the circumstances under which they disseminate important personal information, including Social Security numbers, bank account numbers and credit card numbers. In many cases, simple awareness of social engineering techniques used by criminals to obtain such information can provide substantial protection against identity theft. Checking the accuracy of credit card statements and reliable credit monitoring services offer a useful second line of defense.

However, not all credit monitoring services are made equal. Therefore, it's crucial to do your research to ensure you'll be working with one of the best credit monitoring services currently available.

Example of Credit Watch

For example, Robert has signed up for Ernie's credit watch service. Ernie will monitor Robert's credit reports from the reporting agencies TransUnion, Experian and Equifax, for changes such as credit applications. A few weeks later, Ernie notices Robert has had a slew of credit applications for new credit cards, some of which are in different countries. Ernie alerts Robert that these applications have been made. Robert views his credit report and is able to dispute the applications and take additional measures against identify theft since his personal information has been stolen and used to open the fraudulent accounts.