Identity theft protection company LifeLock has been making headlines lately because it will become a publicly traded company October 3. This isn't an investing column, so I'm not writing about whether you should try to get in on this IPO. As a money-saving-advice columnist, I'm writing about whether you should pay for the services that LifeLock (or any other identity protection service) offers.
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Year after year, identity theft tops the list of consumer complaints tracked by the Federal Trade Commission. According to the most-recent data from the Bureau of Justice Statistics, nearly 9 million households had at least one member who was a victim of identity theft in 2010, and losses due to identity theft totaled $13.3 billion.
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Considering these facts, it seems like it might be worth it to pay LifeLock $275 annually for its Ultimate protection plan, which provides monitoring of your personal information, access to your credit score and alerts when information on your existing accounts changes, among other things. But Dave Aitel, an ethical hacker and CEO of Immunity Inc., says that you can get most of the services that LifeLock charges for little to no cost. Furthermore, he says, LifeLock and identity protection services can't prevent you from becoming a victim of identity theft. They will simply alert you if there is a problem, then you have to take action.
The price of an identity protection service might be worth it for some people who don't actively monitor their accounts and credit information, Aitel says. But here's how you can keep tabs on your personal information for free -- or at a much lower price:
Monitor your credit. Each year you're entitled to a free credit report from each of the three credit bureaus -- Experian, Equifax and TransUnion. Go to AnnualCreditReport.com to get your free copies. Rather than order all three at once, order from just one of the credit bureaus every four months so that you can monitor your credit history throughout the year. Look for any mistakes or accounts that don't belong to you. If you find any problems, see How to Fix an Error on Your Credit Report for advice on filing a dispute with the credit bureau.
Keep tabs on your credit score. For just $8, you can get your credit score from the credit bureaus when you order your free credit report at AnnualCreditReport.com. Errors in your credit history can pull down your score. At myFICO.com for $19.95 you can get your FICO credit score, which is based on your credit history and is the score lenders typically use when determining whether to give you a loan or offer you a credit card.
Use a free money-management site, such as Mint.com to monitor all of your accounts and transactions. By using Mint.com to track where his money was going, Aitel says that he was able to detect fraudulent payments being made from one of his accounts. See Which Budgeting Site Is Best for You?
Set up alerts on your bank accounts. Many banks allow you to sign up for and receive alerts when when withdrawals from your account exceed certain levels and checks clear, which can help you spot transactions you might not have made or authorized.
Set up alerts on your credit accounts. Credit card issuers allow cardholders to set up security alerts so that they can be notified, for example, when a charge more than a certain amount or an international charge is authorized on their card. Even if you don't sign up to receive security alerts, card issuers typically will alert you when there is suspicious activity on your card.
File a fraud alert with one of the credit bureaus (which will notify the other two) if your credit or debit card is stolen. The alert will require lenders to attempt to verify your identity before issuing any new credit in your name. Fraud alerts usually last for 90 days. You can get up to seven years of extended fraud-alert protection and two free credit reports from each of the bureaus within 12 months if you end up becoming a victim of ID theft.
Initiate a credit freeze to prohibit lenders and other companies from accessing your credit report without your permission. This can help prevent identity thieves from taking out credit in your name. You have to pay $10 at each of the three credit bureaus to freeze your accounts (and another $10 each to lift it). See How a Credit Freeze Works for more information.
Check if you have access to an identity-theft program or fraud-resolution service through your insurance company, financial institution or even your employer. You might be able to take advantage of these services at little or no cost.
Get help from the FTC if your identity is stolen by downloading its free step-by-step guide for ID theft victims.