What Credit Monitoring Can Do For You

Why Does Being Credit Invisible Matter?

Credit invisibility is caused by the absence of credit reports, and you may lack credit reports if you have no record of having used consumer credit—that is, you haven't borrowed or repaid money in the form of loans, credit card accounts or other types of consumer credit.

Being credit invisible can affect your day-to-day life in a number of ways, such as:

• Inability to get a credit score. Credit scores are based on the information compiled in your credit reports, so if you have no credit report, you cannot get a credit score. FICO^® Scores^Θ, used by 90% of top lenders, require 180 days (six months) of recorded credit activity (or "credit visibility") before they can be calculated.
• Challenges with credit applications. Many lenders use credit scores and reports to automate lending decisions. If you're credit invisible, lenders typically must evaluate your credit applications using a more time-consuming process called manual underwriting, which has a loan officer personally inspect your financial documents to gauge the likelihood that you will repay your loans. Credit reports and scores encapsulate much of the information required for underwriting, so automated loan decisions typically come much more quickly.
• Difficulty with emergency loans. Because speedy or instant credit approvals increasingly rely on credit reports and credit scores, being credit invisible may limit your options when you need to borrow money quickly. This means credit invisible individuals rely disproportionally on payday loans, auto title loans and other expensive (and sometimes predatory) lending options when they need emergency cash or credit.
• Higher security deposits. It's common for landlords to run a credit check when you apply for an apartment, and for cable companies and internet providers to do the same when you sign up for service. In each case, it helps the landlord or service provider decide whether to do business with you and, if so, how large a security deposit to charge you for an apartment or leased equipment such as a wireless modem or cable box. Credit invisibility is not the same as poor credit, of course, and it probably won't prompt a refusal to work with you, but in many cases lack of a credit history can be grounds for requiring a hefty security deposit.

How to Go From Credit Invisible to Credit Visible

It's a classic conundrum: How can you establish a record of credit payments when a lack of credit history makes it difficult to borrow money? People have tackled this problem for generations and, fortunately, there are some tried-and-true strategies for getting credit visible:

• Become an authorized user on a friend's or family member's credit card. As an authorized user on someone else's account, you get your own card but share in the primary account holder's borrowing limit and payment history. As long as the account is managed responsibly—meaning no late payments or maxed out balances—its positive payment record will appear on your credit reports and potentially improve your credit scores.
• Enroll in Experian Boost^®ø. This free feature lets you use your history making eligible rent, utility, cellphone and streaming service payments to establish an Experian credit report. While it won't make you visible to the other national credit bureaus, Boost could open you up to offers from lenders. That includes the personalized offers for credit cards based on your credit profile accessible through Experian's card comparison tool. You can also use Experian Go™ to help you establish an Experian credit report for free and get tools and insights to help you as you begin building credit.
• Apply for a secured credit card. With a secured credit card, you put down cash as collateral, and the amount of your deposit typically becomes your credit limit. Paying on time as agreed each month will establish a positive payment history at the national credit bureaus, which will remedy your credit invisibility and put you on track for good credit scores.
• Seek a credit-builder loan. Available through many credit unions, these specialized loans are designed to help the credit invisible and those with damaged credit establish good payment records and save some money in the bargain. With a credit-builder loan, you borrow a small amount—typically less than $1,000—but instead of turning the cash over to you, the lender places it in an account you cannot access. (If you fail to make your loan payments as agreed, the lender can keep the loan amount.) After you pay off the loan in a series of monthly payments (typically lasting no more than one year), the savings account, possibly including any accrued interest, is turned over to you—and your payments are recorded in your credit reports at the national bureaus, thus making you "credit visible." If you're considering a credit-builder loan, be sure the lender reports payments to the credit bureaus; not all do.

The disadvantages of credit invisibility are numerous, but with a little effort, it's possible to "be seen" and reap the benefits of greater access to credit. To keep tabs on your progress establishing your credit, create an Experian account to see your credit report and scores for free.

Credit monitoring can help you keep track of changes to your credit report, flag you when new activity occurs, and potentially apprise you of the first signs of fraud. While you can monitor your credit on your own, there are both free and paid services that can do all the legwork for you.

Here's what you need to know about credit monitoring and how it can make your life easier.

How Credit Monitoring Works

When you apply for and use credit, your creditors typically report your activity to one or more of the three national credit reporting agencies: Experian, Equifax and TransUnion. The reported information is collected and organized in three credit reports, one with each agency. Virtually every time you apply for or open a new credit account, pay your bills on time or miss a payment, file for bankruptcy and more, it usually shows up on your credit reports.

Credit monitoring services can help you keep an eye on certain updates that happen with your credit reports, including hard inquiries, new accounts, high credit card balances, missed payments and more. All of these activities can affect your credit scores in one way or another, and getting updates when they occur can help you respond more quickly and work toward maintaining a positive credit history.

What's more, they can be indicators of identity theft or a mistake by a creditor or credit reporting agency. That's especially the case when you didn't apply for credit or open a new account recently, and you've been paying all your bills on time.

What Credit Monitoring Does Not Do

Credit monitoring can do a lot to help you know where your credit stands at any given moment. But it's not a silver bullet to protect you from fraud or a guarantee that your credit will improve. More specifically, here's what not to expect a credit monitoring service to do for you:

• Stop phishing emails
• Keep your information safe from data breaches
• Keep someone from applying for credit in your name
• Alert you when someone applies for a job in your name
• Alert you when someone uses your information to open a utility account (unless the utility provider runs a hard inquiry)
• Report fraud to the authorities on your behalf
• Fix errors for you
• Set fraud alerts and credit freezes
• Do the work to improve your credit

Also, in a few cases, credit monitoring can overlap with identity theft protection services, but the two are separate.

Why Should I Monitor My Credit?

Keeping an eye on your credit is essential for many reasons. If you're not currently monitoring your credit, here are some benefits you stand to gain:

• It can help you improve your overall financial health. Your credit profile is a good indicator of your overall financial health, and practicing good credit habits can help you save money and work toward important financial goals. Credit monitoring can help you see which areas of your credit profile need to be addressed so you can stay on the right track.
• It can help you detect identity theft early. There's no surefire way to insulate yourself from identity theft completely, but good credit monitoring can help you spot signs, such as a new account or credit inquiry, before things get worse.
• It can help you spot inaccuracies. While it's not common, it's possible that incorrect information can be reported and added to one or more of your credit reports. As updates happen, credit monitoring can help you see these inaccuracies before they take a heavy toll on your credit scores.
• It can save you time. If you employ the help of a credit monitoring service, it can do the legwork for you, saving you time to spend on things you'd rather be doing.

Can I Monitor My Credit Myself?

It is possible to monitor your own credit without the help of credit monitoring services. However, it can be a time-consuming endeavor and isn't as effective as using a free or paid service. Consumers are allowed to access their credit report from each of the three credit reporting agencies for free once a week through AnnualCreditReport.com.

This means that instead of getting constant updates about what's going on with your credit reports, you'll only be able to check periodically—either all three reports at the same time once a year or one report every four months.

Also, you'll need to read through each report yourself and compare what you find with the previous year's report. And because of the way some tradelines are listed on your credit reports, it's possible you won't recognize a legitimate account right away and waste time verifying or disputing it.

As a result, it may be better to take advantage of a credit monitoring service, even if it's just a free one that doesn't provide the full spectrum of tools and resources.

How to Get the Most out of Credit Monitoring

If you decide to enlist the help of a credit monitoring service, here are some tips to help you make the most of what's available:

• Customize notifications. Credit monitoring services may send you all kinds of updates, and it's easy to get overwhelmed. To make sure you get only what you need, customize your notifications to focus on what you're specifically looking for, and to filter out what you don't care about.
• Don't get complacent. When you first sign up for a credit monitoring service, it can be extremely helpful to understand just how often your credit reports get updated. But over time, it can be easy to get complacent, especially if you never see anything suspicious. Avoid this temptation, however. Check each notification you get to make sure you stay on top of things.
• Act on suspicious changes. If you notice something inaccurate or potentially fraudulent, don't wait to act. Work with the creditor and credit reporting agencies to learn more about what's going on and address it, if necessary.
• Use a credit lock feature for the best protection. In addition to using credit monitoring, it's also helpful to take advantage of a credit lock feature, such as Experian CreditLock. These tools allow you to lock your credit file so identity thieves can't use it. If you ever need to apply for credit, you can quickly unlock it to give lenders access, then lock it again when you're done.

Shop Around to Get the Right Fit

There are several credit monitoring services out there to choose from, both free and paid. As you consider what you're looking for, take some time to compare different options to make sure you get the right fit.

Experian's free credit monitoring provides your credit report and FICO^® Score for free, while also alerting you to changes to your credit report. Those changes might include credit inquiries, new credit accounts, missed payments and more. Alerts can remind you to check your report and identify potential identity theft and inaccuracies in your credit report so you can respond quickly.