ID Theft Monitoring Services: What You Need To Know

But monitoring is not necessarily the best way to prevent or even defend against identity theft. "I think a freeze is a much better way to control your credit," says EPIC's Roschke. "It prevents things from happening without your permission. And in many ways, that's better than credit monitoring, because you don't have to keep an eye on it. You've just locked it up."

Five (Mostly) Free Alternatives to ID Theft Monitoring Services

Instead of paying for identity theft monitoring, consumers can roll their own monitoring, prevention, and reaction program, mostly for free. Here's where to start:

1. Watch your credit reports. Everyone is entitled to see a free credit report annually from each of the three credit-reporting agencies (Experian, Equifax, and TransUnion). To obtain yours, see AnnualCreditReport.com.

2. Use credit freezes. A credit freeze (aka "security freeze") locks credit reports so only you or current creditors can see it. It can also be unlocked on a per-creditor basis, for example if you're going to buy a house, car, or get a new credit card.

   The cost is $10 per bureau to place a freeze and $10 to lift a freeze, though this varies by state, and may even be free, especially for senior citizens or victims of identity theft. (For a state-by-state breakdown of costs, see Consumers Union.) This approach is better suited to financially established people, versus younger people who may need fast access to credit.

3. Place fraud alerts. Under the Fair Credit Reporting Act, consumers may place a fraud alert on their credit report for 90 days -- renewable indefinitely -- which warns potential creditors that there's been fraudulent activity. Also available: an extended, 7-year alert, which also excludes you for 5 years from "pre-approved" credit card offers. First, however, you must file an FTC identity theft report.

4. Avoid debit cards. Attacks which steal card numbers via ID-swiping devices -- often installed at gas stations and grocery stores -- are on the rise. "That information can be sent overseas, and there's a whole industry that makes up fake credit or debit cards," says Stephens. Suddenly, your account may be empty. While credit card losses are typically capped at $50 (if not waived, as long as the financial institution doesn't suspect you of fraud), no such protections exist for debit cards.

5. Look to resolution services. Public agencies and non-profit organizations can help you clean up identity theft for free. Start with the Privacy Rights Clearinghouse, MassPIRG's How to Clean Up Identity Theft, and the FTC's Fighting Back Against ID Theft.

What No Identity Theft Monitoring Can Catch

One word of warning: Credit monitoring, credit freezes, and fraud alerts cannot protect against three kinds of identity theft:

• Medical ID Theft. "This is where someone fraudulently uses your insurance information to obtain care in a hospital emergency room," says Stephens. Thanks to the cost of insurance, it's a growing threat, with a grim potential side effect: it creates a fake medical record in your name, perhaps listing a different blood type or incorrect allergies. In a worst-case, emergency room type of scenario, this can be fatal.

• Social Security Number Fraud. Undocumented workers may steal your Social Security number for employment purposes. "All of a sudden, you're going to get a W-2 from the IRS that says, why didn't you report this income?" says Stephens.

• Criminal Identity Theft. If someone is arrested and has fake credentials in your name, then their fingerprints and resulting criminal record may also end up in your name. "Then they don't show up at the court date, and a warrant goes out on their arrest, and probably what happens is, you get pulled over at a traffic stop, and hey, you have a warrant out against you," says Stephens.