Credit protection not fail-safe service


May 27, 2008|By DAN THANH DANG


Identity theft has topped the Federal Trade Commission's annual list of top consumer complaints for several years running. Not surprisingly, several companies have popped up to help ease your worries by offering consumers a secure way to safeguard their personal data from evildoers... for a price, of course.

Reader Renate Thorssell wondered if it was "worthwhile to subscribe to any of the credit protection programs out there?"

"With identity theft so commonplace, it would be comforting to know that someone out there is looking out for us for a change," Thorssell said. "I've seen them advertised on TV and online, LifeLock and ID Secure being two that I am aware of. I do check my credit reports every four months, hitting each agency once a year, but is this enough? Should I opt for extra protection?"

The A:

Luckily for Thorssell and for me, Consumer Reports has already done most of the heavy lifting on this topic.

But before I launch into what those consumer gurus have to say about such services, let's make it very clear that absolutely no one can protect you 100 percent from identity theft. You can take measures to secure your data, but there are no guarantees. Any company that purports to do so is preying on your fear of fraud.

Credit monitoring doesn't stop identity theft; it just makes money for the companies offering credit monitoring services.

In fact, the FTC and many consumer groups do not recommend signing up for such services. According to Consumer Reports' analysis, an examination of monitoring services "shows that as currently designed, such services are often overrated, oversold, and overpriced."

The following are a number of problems with most services, the magazine says:

*Credit reporting bureaus don't always flag fraudulent use of your Social Security number. If enough new data come in with an SSN that matches the thief's name and address, the credit bureaus can establish the new identity as legitimate and sell the new data to prospective creditors. As long as your file and your identity thief's file are separate, a monitoring service will not pick that up.

*In an assessment of 16 credit monitoring services, eight monitored the credit reports at only one of the three major credit bureaus. Consumers should know that creditors don't always report to all three bureaus.

*Some services don't alert you to sudden activity in dormant accounts, unexpected increases in balance levels, changes in existing accounts or the appearance of a negative record.

*Built-in delays and deficiencies in how credit information is reported mean that it may take a creditor 60 days or more to report a new fraudulent account.

If you believe you can't live without a credit monitoring service, check first to make sure how the products deal with these security gaps, consumer advocates say.

If you forgo the extra expense, but you're still worried about identity theft, your best course of action might be to sign up for a credit freeze.

Placing a freeze prevents a credit reporting bureau from releasing information about your credit history. If a creditor can't check your credit history, it's unlikely they'd extend new credit to you or anyone else trying to open accounts in your name. The freeze lessens your chances of becoming a victim.

Keep in mind that putting a freeze in place will make it harder for you to get instant credit. So if you're shopping for a car or have the bad habit of signing up for new credit cards often, you might want to hold off on putting a freeze on your reports. You can lift the freeze, of course, but you'll have to pay each time you ask to lift it.

I'll leave it to Thorssell to decide if these services are worth it.

But I will tell you that there are several news reports out about Todd Davis, the LifeLock founder who continues to splash his nine-digit Social Security number for all the world to see in TV commercials and print ads in order to hawk his identity theft protection company.

In daring criminals to steal his identity, Davis has discovered "at least 87 instances in which people have tried to steal his identity, and one succeeded: a guy in Texas who duped an online payday loan operation last year into giving him $500 using Davis' Social Security number," according to an Associated Press article.

To top it off, LifeLock customers in Maryland, New Jersey and West Virginia are now suing Davis. Their gripe is that he knew his service didn't work as promised since it failed him, too.

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