Credit monitoring fees can add up. They range between $15 and $20 per month, coming to about $200 per year. Is it a smart investment? Unfortunately, in most cases it is not. Even though credit monitoring services tout in their ads that they will help prevent credit fraud and identify theft, the reality is that they only report malicious activity after it took place. On top of that, the credit monitoring service may not even be tracking the “right” score that your lenders use.

However, there are some instances in which it is a good idea to pay for active credit monitoring. In this article, we will discuss those instances.

Help to Improve Credit Score for a Major Purchase

The Fair Credit Report Act (FCRA) requires the three credit reporting companies to grant you a free copy of your credit report once every 12 months from each of the three credit bureaus. You can request it at AnnualCreditReport.com. If you stagger your requests, you can get one bureau’s free report every four months and check your report for free three times a year.

However, your free reports don’t include your credit score. If you’re planning to purchase a home or vehicle in the near future, you may need to take steps to improve your credit score. You need not only to know what’s your credit score but also to track it from month to month.

When planning for a major financing goal, like buying a home or car, it may make sense to pay for credit monitoring. You will be able to evaluate the effectiveness of steps you take to improve your credit score. Make sure you check with your lender what credit score you need to qualify for a loan and if a higher score will get you a better interest rate.

Learn How to Monitor Your FICO Credit Score

If you feel helpless when it comes to your credit score and need to get more control on your debt, then signing up for credit monitoring may be a good idea. If you’re being denied for all types of loans, then you need to learn how to improve your credit score. Consulting with an expert may be your best choice, if you can’t figure out what to do on your own, after viewing your free credit report.

Just like you keep track of your weight during a diet, monitoring your credit score keeps you in check and helps you evaluate your progress. Since most lenders use your FICO score, it is a good idea to sign up for a monitoring service that focuses on a real FICO score, not some scoring model that a firm creates but that lenders don’t use.

Deal with High Risk of Identify Theft

Another reason to pay for credit monitoring has both critics and supporters. If you are at a high risk of identity theft or you have been informed that your Social Security number has been compromised, you may find some comfort in knowing that you have an active credit monitoring service in place. While it may not prevent further problems, a monitoring service may provide you some peace of mind during troubling times.

Critics of this scenario recommend that instead you pay for a credit freeze (cost varies per state), or set a 90-day credit fraud alert through the credit reporting agencies. These alternatives may be free for victims from identify theft in certain states for, but also they actually prevent any new accounts from being opened on your behalf.

When It’s Smart to Pay for Credit Monitoring

From these three scenarios, you can see that there are some situations that it is smart to pay for credit monitoring services. Keep in mind that these are just temporary situations and that you should be ok with your free credit report issued every 12 months.

It may be worth paying for credit monitoring when:

  • You need help to improve your credit score for a major purchase (auto loan, mortgage).
  • You need to learn how your FICO score works and how to improve it.
  • You want some peace of mind in the event or high probability of identity theft.