No Fail-Safe Identity Protection

Plenty of products promise to help consumers avoid identity theft, but none of them is foolproof.

If a product claims to prevent identity theft, don't believe it, says Linda Foley, founder of the Identity Theft Resource Center in San Diego, Calif. "You can't protect a person from identity theft. It's impossible. All we can do is minimize our risk."

And, while these products can reduce your likelihood of becoming a victim, many employ methods that consumers can use on their own, for free.

Fraud Alerts

Many products offer to place fraud alerts on consumers' credit reports, so when a retailer or creditor checks your report in response to a request for a new credit card or financing for that plasma television, the fraud alert tells them to double-check that the person seeking credit is you. Ideally, the creditor delays extending credit until reaching you.

But alerts "are not the silver bullet that people are looking for," says Guillaume Deybach, chief executive of Europ Assistance USA, a Washington, D.C.-based firm offering travel aid and identity-theft assistance.

Drawback: Alerts focus only on thieves opening new credit lines in your name, not the use of existing accounts. Also, some retailers don't check credit reports before extending credit and those that do don't always try to reach you -- they may just ask the thief some easy-to-answer questions. Still, alerts increase the chance you'll be contacted if someone applies for credit in your name.

Consumers can call or go online to each of the three credit-reporting agencies (Experian, Equifax and TransUnion) to place a fraud alert for free. You can do it yourself by phone, says Paul Stephens, director of policy and advocacy for the San Diego-based Privacy Rights Clearinghouse.

Generally, fraud alerts expire after 90 days. If you don't want to bother remembering to renew alerts, several companies, such as LifeLock, sell the service of placing alerts for you, for about $10 a month, or bundled into pricier packages that include other services.

Credit Freeze

Alternatively, you can use a credit freeze to lock up your report at each of the three bureaus, preventing new credit being extended in your name. This won't affect access to current credit lines, but will delay your access to new credit (it takes about three days to lift a freeze). Freezes aren't advised for people in precarious financial positions who might need to borrow money in a hurry, but a credit freeze is a powerful way to stop thieves.

Drawback: Freezes don't stop thieves from tapping existing credit or bank accounts, nor do they address other identity theft, such as when a thief provides your name as his identity when pulled over for a traffic violation.

Consumers can freeze their reports by calling each of the three agencies. It generally costs $10 to place a freeze ($30 to freeze all three major reports) and $10 to lift each freeze; these costs are sometimes waived. For more details, visit financialprivacynow.org. Or, you can pay for a product that includes a credit freeze, such as offered by TrustedID and others.

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