Credit Protection vs. Credit Monitoring: What’s the difference?

Protecting your non-public personal information, like your social security number, is becoming more difficult than ever before. The advancement of technology and cyber attacks have shell-shocked the world and aren’t stopping anytime soon.

In the past six months, I personally received mail notices about security data breaches from three major global institutions: Prudential Insurance, AT&T, and Ticketmaster.

They look like this….

The letters all say essentially the same thing…

1. Our servers were hacked.

2. Your personal info may have been leaked

3. In exchange, we are offering X number of months of free credit “monitoring”.

I get calls from clients regularly asking about similar letters they receive in the mail from other institutions.

“What do I do about this?”

The risk of identity theft seems to increase every day. Hand-in-hand with the increasing risk, consumer credit “protection” and “monitoring” products are popping up like hedgehogs on a golf course.

Today’s reading is going to help you answer the following questions:

First, let’s address the critical difference between monitoring vs. protecting your credit.

Credit Monitoring is like keeping an eye on your credit report for alerts, changes, or suspicious activity.

Most major credit card companies and banking institutions are offering these services to their customers for free. Other companies are offering these services as paid subscriptions.

These services will let you know:

• When your credit score changes or

• Alert you when there is a new inquiry on your credit report.

Essentially, credit monitoring lets you know when you or someone else has already accessed your information.

Credit Protection is the act of preventing access to your credit report and other non-public personal information like your social security number or bank account number

Most major banking institutions or credit card companies do not offer these services. They offer credit monitoring, not credit protection.

Credit monitoring will send you an alert that an institution has pulled your credit. You stop and think, I haven’t given anyone my information or requested to have my credit pulled. You go to check your credit report only to find that someone has opened a new bank account in your name.

It’s nice that the service lets you know something bad has happened. But that’s the issue. It’s already happened.

You’re information, your identity was stolen. The extent of the issue is to be determined.

Credit Protection will help prevent someone from using your information in the first place.

Somehow, they got your information. Maybe there was a data breach like the one I received above. They went to apply for a new credit card in your name. The credit protection service sent back a message saying, “Sorry, we are unable to access your credit at this time. Please notify the credit bureau so we may access your information…”

Unless they are able to access the credit bureaus on your behalf, which is extremely difficult for the common thief, you’re safe, and the crooks are on to the next victim.

This is credit protection. This is what we need. The unfortunate reality we face today is -

Most major financial transactions in today’s economy are driven by access to our bank accounts or credit reports. If a financial institution can’t access your credit report, the crooks can only do so much.

Sure, they can use your credit card number to make a purchase. But as long as we look at our transactions once or twice a month, we can notify our credit card company of a strange transaction and dispute the charge.

Otherwise, without our credit report, they can’t…

• open a credit card

• open a bank account

• apply for a loan of any kind

• or even open a new utility account like a cell phone, water, or gas bill.

The first step in protecting your identity and your bank accounts is to accept the reality that crooks will obtain your information in some way.

We simply share it with too many different institutions: banks, credit cards, online shopping, Amazon, Apple, Target, insurance companies, and the list goes on and on. These data leaks are happening every day. We wish they wouldn’t, but it’s become the norm.

Here’s what we need to do to protect ourselves, our families, and our money from identity theft.

#1 Never use your debit card to shop online.

There are very few institutions that require you to enter direct access to a debit card or checking account for payments. Some utility companies, like my water bill, have to be debited from my checking account. Mortgages must be debited from your checking account.

Aside from a select few items, everything else can be paid for with a credit card. In fact, 100% of all online shopping can be paid for with a credit card.

You should not share your bank account information or your debit card, which has direct access to your bank account, unless it is absolutely necessary.

When a fraudulent charge shows up on a credit card, no money has been withdrawn from anywhere. When a fraudulent charge appears in your checking or savings account, the money is gone. 

Once the money is gone, there isn’t much anyone, even the bank, can do about it. People have lost millions of dollars from people stealing bank accounts and debit card information.

Credit cards act as a medium between merchants and your bank account. If your credit card information gets stolen, it is relatively easy to dispute a charge and, if necessary, cancel the card and have a new one mailed to you with a new number.

Of course, we don’t want our credit card information stolen, either. When possible, use a payment intermediary.

Think Apple Pay, Paypal, Amazon Pay, Google Pay, etc.

These services work by processing a payment to the merchant online without directly sharing your payment information. They help us limit the number of organizations our personal information is shared with, reducing the risk of someone stealing and using it.

While these organizations are not bulletproof, they spend billions of dollars each year on cyber security. We can’t say the same for Sally’s Discount Shoes online store. Pay online through one of these services instead of sharing your credit card information directly with the merchants.

And remember - NEVER share your debit card information with an online merchant. And only share it with a utility company when absolutely necessary.

#2 Freeze Your Credit

What is a credit freeze?

A credit freeze, also known as a security freeze, is a protective measure that consumers can take to restrict access to their credit reports. When a credit freeze is in place, creditors and lenders cannot access the individual’s credit file, which helps prevent identity theft and unauthorized credit applications in the consumer's name. Here’s how it works:

1. Activation: The consumer initiates a credit freeze by contacting each of the major credit bureaus—Equifax, Experian, and TransUnion—to request the freeze.

2. Effect: Once the freeze is active, lenders and creditors cannot access the individual’s credit report to evaluate creditworthiness, effectively blocking new credit lines from being opened in the consumer’s name without their consent.

3. Temporary Lift or Removal: Consumers can temporarily lift a credit freeze when they need to apply for new credit by providing a unique PIN or password given at the time of the freeze. The freeze can also be permanently removed by the consumer.

4. Cost: As of recent legislation, placing, lifting, and removing a credit freeze is free in many jurisdictions, including the United States.

5. Duration: The credit freeze remains in effect until the consumer decides to lift it permanently.

A credit freeze is the most effective way to prevent anyone other than yourself from accessing your credit information. Preventing anyone else from opening accounts or applying for loans in your name.

Credit monitoring does nothing more than notify you when something has already gone wrong. Credit Protection - a credit freeze - prevents bad actors in the first place.

How to place a Credit Freeze for free.

There are hundreds of providers offering paid services for “credit monitoring.” The bottom line is that you can get this for free from almost any major credit card company. Most of them show your credit information on the app's home screen when you log in.

I do not recommend paying for credit monitoring services. They are a waste of money. You can get them for free from your bank or credit card provider.

A credit freeze is also free. And I’m going to show you exactly how to do it.

A credit freeze originates at all three of the major credit bureaus.

Equifax. Transunion. Experian.

Each of these companies have a place on their website to freeze your credit for free.

Each of these companies will also attempt to sell you a subscription service before you can access the free credit freeze.

Below you can see the page you want to land on to start your credit freeze. For your convenience I’ve also linked each image to the respective companies page to take you right there.

Once you are on the page you will want to either create an account if you never have or log in. When creating an account, DO NOT SIGN UP for any paid subscriptions.

Click next. Continue through the account creation. Always elect the free option for your account.

It may seem like there is no free option. They try to hide it. Don’t be fooled.

Deny, Skip, Next, Continue past anything they try to sell you. It is completely unnecessary.

Every time I log into Equifax, it looks like this - skip it.

The government passed legislation mandating these companies allow you to freeze your credit for free. Don’t pay for it.

Finally, you will land on the page to manage your credit freeze.

For a more detailed guide on how to set your credit freeze for each bureau, check out my YouTube video here. I show you the exact steps for all three bureaus.

Once you are logged in, you will see a screen that looks like this

My credit is frozen, so you can see it asks me if I want to temporarily lift it. If yours is not frozen, it will ask you if you want to freeze it temporarily or permanently.

Once you have this set up, it is very easy to manage. Permanently freeze your credit unless you are applying for a new loan soon.

You can always log in and tell it to temporarily lift the freeze; the institution you are working with can pull your information. And after a certain number of days it will automatically freeze again.

This is how you freeze your credit. This is the best way to protect your identity.

And it’s free.

-Rob

Securities offered through LPL Financial, Member FINRA/ SIPC. Investment advice offered through IHT Wealth Management, a registered investment advisor. IHT Wealth Management and AutomotiveWealth are separate entities from LPL Financial.

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