Credit monitoring—sounds like a scary and potentially time-consuming task—but it’s not. It’s a very important habit to build though, as your credit report is a lagging indicator of your overall financial health. And you need to be aware of what your credit score looks like at all times. But what exactly does credit monitoring entail and how can you go about it? Let’s dive right into it.
What is credit monitoring and why is it important?
Credit monitoring is the regular tracking of your credit report to determine your creditworthiness and to stay on top of any changes to your credit file. There are various credit monitoring services, free and paid, that do this work for you.
Now you might be wondering, why exactly do I need to monitor my credit report and my credit score? That’s a valid question, because nobody wants to add extra work to their already busy days. But the thing is, in Canada, a lot of our important services and comforts are largely dependent on our credit file—things such as insurance premiums, loan approvals, sometimes even jobs. If you have a healthy credit score and your credit report doesn’t show any red flags, your chances of securing a better interest rate, a lower insurance premium, and a well-paying job are higher.
There are certain other indirect benefits of credit monitoring as well. These include early detection of fraud and identity theft, a better overview of your spending history, and an overall understanding of your finances.
How does credit monitoring work?
Different credit bureaus in Canada may collect different information about your credit usage, according to the Canadian government’s website. The two major bureaus are TransUnion and Equifax, and they both use slightly different parameters to evaluate your credit history and build your credit report. Depending on which bureau you’re requesting your credit report from, the information may look slightly different, but in general, here’s what you can expect to see as a part of their credit monitoring:
Factors impacting your score
Bank accounts in your name
Credit card debt
Recommendations on how to build your credit score
Credit monitoring services monitor and report on the above-mentioned categories while providing you with helpful recommendations to improve your credit score.
What is the best way to monitor your credit?
There are several ways to monitor your credit, ranging from a one-off request to get your credit report from one of the credit bureaus in Canada to creating an account with a credit monitoring service provider for regular updates. The best way and the cheapest way are not the same, so let’s take a look at both options:
The best and the most comprehensive way to monitor your credit is to engage the services of a premium credit monitoring service provider. The best credit monitoring services will not only notify you about updates to your credit score but will also give details about any changes to your credit activity, such as opening a new bank account or getting a new mortgage, etc. Premium credit monitoring services track credit history and send you alerts via text messages, in-app notifications, or emails when a suspicious transaction occurs—or even when there is a change to your credit report.
The cheapest way to monitor your credit is to create an account with one of the free credit monitoring service providers for basic information such as your credit score and any major changes to your credit report.
Are credit monitoring services free?
In Canada, three credit monitoring service providers provide you with basic reviews and updates regarding your credit report. Let’s look at what you get with each option:
Credit Bureau: Equifax
Frequency: Weekly updates
Pros: In addition to your weekly credit report update, Borrowell also gives you product recommendations, such as credit cards you may qualify for or bank accounts that might be relevant to you, based on your credit score and credit history.
Cons: Borrowell reports are only restricted to information provided by Equifax, which is only one of the two major credit bureaus in Canada. It doesn't give you the information on what your TransUnion credit report might look like.
2. Credit Karma
Credit Bureau: TransUnion
Frequency: Weekly updates
Pros: Available in both, US and Canada, making it perfect for people who have business and finances in both countries.
Cons: Credit Karma only uses the proprietary model developed by TransUnion, which is just one of the two major credit bureaus in Canada, making this report only one part of the picture.
Credit Bureau: Equifax
Pros: Also offers a free identity protection service, known as Mogo Protect, that sends you alerts when suspicious activities are detected. It also sends you a notification whenever a hard credit check is detected on your file.
Cons: Similar to Borrowell, it only gives you the credit report from Equifax, meaning you still don’t have the entire information about your credit file.
Ideally, if you want to go for the free credit monitoring option, it’s a good idea to create accounts with multiple free credit monitoring services to cover your bases and get the credit report from both credit bureaus in Canada. Doing this will help you get a complete understanding of your credit standing and your credit score as well as help you understand things you can do to build or improve your credit history.
That being said, just like any other tool or product, credit monitoring services also come with a paid option. The paid version gives you premium service with additional features, such as sending you a daily credit report, in addition to updates about your credit score. Equifax Complete Premier, for example, also comes with features like web scans and identity theft assistance.
There’s no right or wrong answer on what’s the best option: It depends on your needs if you wish to go with limited coverage free credit monitoring or premium features paid credit monitoring.
Can credit monitoring prevent fraud and identity theft?
The Canadian Anti-Fraud Centre (CAFC) Annual Report observed approximately $379 million in reported victim losses from fraud, identity crimes, and associated cybercrime for the year, with the number only estimated to go up in the years to come. 97% of Canadians feel vulnerable to fraudsters and identity theft, but unfortunately, only 33% are regularly checking their credit report for any signs of fraud. Routinely checking credit reports for suspicious activity is an easy way to make sure you’re not a victim of identity theft or credit card fraud. However, no credit monitoring service can guarantee that your identity won’t be stolen or that you won’t be attacked by fraudsters.
That’s because credit monitoring services usually come into the picture by sending you alerts regarding a potential fraud only after the act has been committed. Catching the transaction right away can help ensure you take appropriate measures such as reporting the fraud and blocking your account to prevent further damage—but it can’t necessarily reverse the damage that’s already been done.
If you’re looking for a fool-proof way to protect yourself and your loved ones against fraud and identity theft, identity theft insurance might be the way to go. Additionally, there are things you can do for free to protect your personal information, such as:
Be aware of your surroundings: ATM frauds are more common than you think. Make sure you look over your shoulder and confirm there’s nobody around when you’re doing any transactions.
Don’t click on suspicious emails, messages, or links: Phishing is a type of fraud where the victim unknowingly clicks on an email or a link that installs malware on their device. To safeguard yourself against phishing attacks, be very mindful of the emails or messages you open from unknown senders.
Only share your personal information after verifying legitimacy: Important personal details such as your Social Insurance Number, bank account numbers, and credit card information should never be shared without making sure the party you’re sharing it with is completely legitimate.
Use a password manager: Writing down passwords or using easy passwords that can be easily guessed is a big no-no. Using an encrypted password manager ensures your login information is stored securely.
Avoid accessing sensitive data on public networks: Public wi-fi is often not secure, and accessing personal information when you’re using public networks puts you at risk of potential fraud.
To summarize, regular credit monitoring is useful to alert you when anything suspicious happens and prevent further damages but it can’t guarantee to protect you against fraud or identity theft. Being vigilant, not sharing personal and financial information without a legitimate reason, and avoiding clicking on spam emails or opening links from unknown contacts are some of the ways you can arm yourself against identity theft.
Meghana is a content strategist with experience writing for companies in the technology sector. Originally from India, Meghana has been living in Canada since 2019, where she continues to explore her passion for content marketing.