Consumer identity-theft protection services: What works?

And who actually puts a Social Security number on the side of a truck?
By Dan Tynan




May 6, 2008 (PC World) You can't open a newspaper or a browser without reading about some data spill that has put consumers' personal information at risk. Over the past three years, more than 220 million private records have been lost or stolen, according to the San Diego-based Privacy Rights Clearinghouse. In 2007, 8 million to 15 million Americans had their identities stolen. The odds that it will happen to you are about one in five, according to surveys conducted by the Chubb Group.

Identity theft is a national epidemic, but some firms also see it as a marketing opportunity. In fact, some credit bureaus and banks that facilitated the spread of easy credit--and in the process unwittingly made identity theft a more profitable crime--now sell services to help you avoid having your identity pilfered.

For $10 to $20 a month, a company such as LifeLock or TransUnion will monitor your credit reports, alert you if anyone opens an account in your name, and help you recover fraudulent charges. But you can do many of the things these services offer to do, at no cost except for the effort (see "DIY identity-theft protection: A 12-step program" for details).

To assess the paid services, we signed up with six leading firms. Even services that worked as advertised weren't comprehensive. Only two -- Suze Orman's Identity Theft Kit and Identity Guard -- offered protection for anything beyond financial fraud. Using any of the services is better than doing nothing, but you may still have to work to safeguard your identity.

Monitoring your credit
Annual credit reports are free, but Javelin Strategy and Research president James Van Dyke says that credit monitoring has become a billion-dollar business for credit bureaus.

The keys to your financial identity jangle in the pockets of the Big Three credit bureaus: Equifax, Experian, and TransUnion. When you apply for a credit card, sign up for a wireless plan, or apply for a job, the company you're trying to do business with is likely to request a copy of your credit report. If anyone steals your identity, that person's bad behavior goes on your report, hurting your chances for a loan, a phone, or a job.

Federal law entitles you to a free annual report from each of the Big Three. You also qualify for a free copy if you've recently been denied credit or if you're an identity-theft victim. The bureaus make no money by supplying free credit reports, but they make a lot of money -- more than $1 billion annually, according to Javelin Strategy and Research president James Van Dyke--by selling credit-monitoring services.

For $5 to $20 per month, a credit-monitoring service will alert you whenever your report changes. If a thief opens new accounts in your name, you'll usually find out within a few days. Most monitoring services offer online credit reports, online credit scores (showing your chances of obtaining credit), and tools for managing and improving your credit rating.

But a credit-monitoring service won't tell you if someone steals your credit card and runs up huge bills; for that you must check your monthly billing statements. Furthermore, if you receive an alert about a dubious inquiry, you'll have to identify it as bogus and contact the credit bureaus on your own.

Our real-world tests of two major credit-monitoring services yielded mixed results. First we signed up for TrueCredit's three-in-one monitoring service, which promises to deliver e-mail alerts from all three bureaus for $15 a month. The first two times our tester tried to open a new credit account, TrueCredit failed to issue an alert. A third test a month later was more successful.