Do You Know How To Keep Your Credit Safe?
Your credit score is one of your most valuable financial assets. Unfortunately, few people think about protecting it the same way they do their physical credit card or cash they carry around in their wallet.
Your credit score is like your reputation: It can take years to build and minutes to destroy.
A significant drop in your credit score can impact your ability to get loans, find rental accommodations or buy real estate, or land a job. A poor credit history can even increase the interest rates on your insurance policies and cause utility companies to request a deposit on services.
Credit protection is one of the few ways you can help safeguard your credit against fraud, identity theft, or even missing payments.
In this guide, we’ll explain how credit protection works, the four different types of credit protection you can use, and whether or not it’s worth it for you to protect your credit.
What Is Credit Protection? What Does It Do?
Credit protection refers to the collection of laws, services, and tools that can help protect consumers’ credit scores against financial fraud, identity theft, or changes in your ability to pay off debts.
There are numerous factors that can impact your credit score; and credit protection comes in a variety of forms to help safeguard you against them.
Here are a few examples of how different types of credit protection might work:
- Credit monitoring that protects your credit score against fraud. If an identity thief manages to open new accounts or take out loans in your name, it can destroy your credit score. Credit monitoring is a form of credit protection that warns you of changes to your credit score or new accounts opened in your name so you can shut them down before the damage is done.
- Credit card account protection that covers your minimum balance. Most credit card lenders and financial institutions offer insurance in the case of job loss, critical illness, or death. This form of credit protection will cover the minimum payments on your credit card balance or loans to protect your credit score.
The type of credit protection you require depends on your needs, employment situation, and risk level. Let’s look at the different options available and how to choose which ones are right for you.
What Are the 4 Main Types of Credit Protection?
Credit protection can refer to a number of different protective measures. Here are the four main types of credit protection and how to decide whether they’re right for you:
1. Credit monitoring and alerts
The United States is the most credit fraud-prone country in the world. Since 2020, more than 86% of U.S. consumers have been victims of data breaches, credit fraud, or identity theft [*].
If your identity has been stolen, scammers may try to open new accounts or take out loans in your name. This can have a serious impact on your credit score and leave you saddled with debts and issues that can take years to resolve.
Credit monitoring apps and services track changes to your credit score and any new accounts or inquiries into your credit report.
A credit inquiry is typically made by lenders when you apply for a credit card or loan. These inquiries can appear on your credit report for up to two years and have negative short-term impacts on your credit score.
Pro tip: Make sure you’re covered by three-bureau credit monitoring. Some credit monitoring companies only check your credit with one or two of the three main credit reporting agencies, leaving you open to fraud. Aura has direct connections with all three credit bureaus and provides fraud alerts up to 4x faster than the competition.
When to choose credit monitoring and alerts:
- If you’re 70 and older. The Federal Trade Commission (FTC) claims that seniors report much higher median losses to fraud and are therefore good candidates for credit monitoring.
- If you’ve already been the victim of identity theft. Nearly 50% of all identity theft victims are repeat victims [*]. If your personal information has already been compromised, you should be actively monitoring your credit for signs of fraud so you can shut down scammers and freeze your accounts.
- If you want peace of mind knowing you’ll be alerted to changes in your credit score. It’s almost impossible to monitor your credit in real-time (which is what modern credit monitoring services like Aura do). A small monthly fee can give you peace of mind knowing your accounts are being constantly monitored.
Note: All three credit bureaus — Equifax, Experian, and TransUnion — offer free credit reports and basic credit monitoring services. However, for premium levels of credit protection, you would want to use a more comprehensive service like Aura to keep your accounts and identity safe.
💡 Related: The 11 Best Credit Monitoring Services (Free & Paid Options) →
2. Identity theft protection
Like credit monitoring and alerts, identity theft protection warns you of any suspicious activity on your credit report. It also monitors your personally identifiable information (PII) for signs of fraud. For example, if a criminal is using your Social Security number to apply for government loans or file fraudulent tax returns.
Identity theft protection shields you from those attempting to use your PII to make a purchase, open a credit line, or steal money from your bank account. Aura’s top-rated identity theft protection also includes $1,000,000 in identity theft insurance to cover eligible losses and costs due to identity theft.
When to choose identity theft protection:
- If you want to protect your family against online threats. Identity theft protection can monitor and help protect your children, parents, or grandparents against scams and financial fraud. Learn more about family identity theft protection here.
- If you have numerous online accounts. The average American has more than 100 online accounts [*], yet only 12% use unique passwords for each of them [*]. If you shop, bank, and work online, identity theft protection can help prevent hacking, cyberattacks, and phishing scams.
- If your personal information has already been leaked in a data breach. Billions of pieces of sensitive data are leaked every year from company databases. If your information is on the Dark Web, you could be at risk of identity theft and financial fraud.
3. Purchase protection
Purchase protection — also referred to as purchase assurance or purchase security — refers to services that safeguard your ability to receive repairs, replacements, or reimbursements on certain damaged or stolen items.
Most major credit card issuers — like Visa and American Express — have policies for purchase protection included in their coverage benefits.
There are three primary types of purchase protection available to credit card customers:
- Buyer protection plans cover items that have been accidentally damaged or stolen. These plans are often applicable for a limited amount of time post-purchase, and may only apply to purchases that exceed a certain price.
- Return extensions cover items that a cardholder wishes to return but the merchant refuses to take back. The credit card provider can issue a refund for the purchase price so long as the claim is filed within a specific time frame.
- Warranty extensions cover items beyond the terms of the original manufacturer’s warranty. Often extending up to an additional year, these may only kick in once the card holder registers the product.
Though each credit card network is different, most claims for purchase protection can be filed online or by phone within 90 days of purchase.
When to choose purchase protection:
Though purchase protection can prove to be incredibly valuable, most consumers are not aware of their credit card network’s policy to receive repairs, replacements, or even refunds.
If you tend to use your credit cards to make expensive purchases, you’ll want to know if your credit card providers have policies in place that cover accidents. These policies may be useful for those who:
- Buy large electronics or pieces of furniture.
- Purchase items often targeted by thieves, such as cellphones.
- Purchase products without extensive warranties.
- Shop from merchants that don’t accept returns.
💡 Related: The Top 5 Credit Protection Services (How To Choose) →
4. Credit insurance
Credit insurance — also sometimes called payment protection insurance, credit card insurance, creditor’s insurance, or credit protection insurance — refers to protection for credit card or loan payments in the event that you’re unable to make payments due to an unexpected financial or personal setback, like job loss.
This type of insurance can help if you lose your job, become disabled, or face another unforeseen circumstance that leaves you unable to make your monthly payments.
Insurance coverage can suspend your monthly payments briefly, as long as you can document why you’re eligible for these exclusions.
For instance, it’s common to receive a written note from your doctor that verifies a new disability to support your inability to make minimum payments. Likewise, proof of recent unemployment may serve as documentation to pause credit card payments.
Credit insurance is often offered as a complementary or paid addition to your credit card coverage benefits. However, credit insurance can also be applied to other lines of credit, such as personal loans or mortgages.
When to choose credit insurance:
- If you’re at a high risk of health issues or losing your job. Credit insurance can help borrowers maintain a solid credit history and keep creditors away during stressful life events. For example, if you experience involuntary unemployment, have suffered a disability that leaves you unable to work, or are undergoing a divorce or separation.
- If you’re willing to pay to protect your credit. In many instances, there are fees associated with credit insurance coverage — usually billed at an amount based off of your loan or credit card balance. Depending on your lender, there’s also a chance that your outstanding balance can accrue interest. This means the costs can add up quickly if you carry a large balance. Ultimately, it’s up to you to decide whether credit insurance is worthwhile or could potentially diminish your savings.
Is Credit Protection Worth It? Pros and Cons
Credit protection can protect your financial health in the face of fraud, identity theft, or stressful life events. But, like most insurance policies, you have to weigh the costs and benefits to make sure it’s right for you.
Pros of credit protection
- Through the various types of credit protection, you can receive alerts when suspicious or unusual activity takes place involving your credit.
- You can also stop fraudulent activity before scammers open new accounts or make purchases in your name.
- These services protect you from data breaches. If you are a potential target, your credit protection can serve as a proactive shield.
- Likewise, credit protection can safeguard your assets — whether they’re damaged, stolen, or if you can’t make payments on them.
Cons of credit protection
Despite the numerous benefits of credit protection, there are a few disadvantages. For one, advanced levels of protection may cost you more in monthly or annual fees.
- From credit monitoring to credit insurance, either type of service may tack on costs — and each card must be insured separately.
- Unless you freeze your credit, new accounts can still be opened in your name. Even if you do, a credit freeze isn’t a cure-all. Crafty scammers can still take out home, auto, or life insurance in your name.
- Not all emergency situations or purchase reimbursements may be covered under your particular coverage benefits.
- Similarly, coverage does not offer assistance for long-term financial or personal hardship lasting more than two years.
Can Credit Protection Help Safeguard You Against Identity Theft?
Credit protection alone isn’t enough to protect you against identity theft.
Even with protection in place, criminals can still steal your personal information and use it to open new accounts or siphon funds out of your bank account. In most cases, you’ll only find out after you’ve been a victim of identity theft.
However, most identity theft protection services offer varying levels of credit protection through credit monitoring, financial alerts, and proactive device security.
By securing your personal information, scammers won’t be able to access your financial accounts in the first place — keeping your credit score safe and secure.
Even better, identity theft protection services like Aura offer 24/7 support from Fraud Resolution Specialists. This means that if fraudsters manage to access your credit score, you’ll have the support of a dedicated team in recovering from fraud and fixing your damaged credit.
Don’t Let Scammers Outwit You. Protect Yourself with Aura.
When your financial and personal stability is on the line, you’ll want to have credit protection options in your corner.
To safeguard your identity and assets from fraudulent activity, and to protect your livelihood in the face of the unexpected, consider signing up for Aura.
Aura will alert you about any fraudulent activity on your account and let you know if any of your personally identifiable information (PII) is being misused. Plus, if the worst should happen, every adult member included in your Aura plan is covered by a $1,000,000 insurance policy for eligible losses.
