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Does identity theft protection and credit monitoring really work?

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Everyone is at risk of identity theft. But can you really protect against it? Companies offering identity theft protection and credit monitoring services seem to suggest that yes, you can. But how reliable are these services? Do they really deliver on their promise, or can you protect your identity from theft without signing up to expensive "identity insurance"? 

What is identity theft protection?

Identity theft protection is a service from financial companies that is designed to protect your ID from theft, thereby avoiding the inevitable fraud that follows.

They typically offer three things:

  1. Monitoring: your credit files are monitored for changes.
  2. Alerts: you receive notification of new accounts opened in your name, or unusual spending.
  3. Recovery: identity theft protection comes with an insurance element, that covers the recovery of lost bank and card balances, and the impact of other fraudulent activity in your name.

You might also find regular emails about identity theft and other privacy-related news appear in your inbox when you sign up to a protection service.

Who offers credit monitoring?

If you have decided to pay for credit monitoring, you have several options. As identity theft has increased in recent years, so the number of solutions offering protection has grown.

Where you're based determines what credit monitoring solutions are available to you. 

For example, if you're based in the US, Norton LifeLock, ID Watchdog, and IdentityForce all offer paid services. They're all comprehensive coverage options, with monthly and annual subscriptions to match.

Need something less extensive? Credit Karma is a free service that checks for changes to Equifax and TransUnion reports. This service will send alerts to you, also prepares personalized financial products to help ensure you're accepted for credit. As such, it's an all-in-one credit care tool.

Credit monitoring from Credit Karma is also available in the UK.

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Downsides of identity theft protection

Which identity theft protection service you choose depends on two things: expectation, and budget.

Sadly, while all of the big names promise much, there are too many differences between them. ID Watchdog's premium protection offers few services than IdentityForce, so it pays to research which product is most suitable for you. For example, IdentityForce UltraSecure+Credit and LifeLock Ultimate Plus both offer family plans, whereas ID Watchdog doesn't. 

Then there's the issue of trust, reliability, and transparency. 

For example, while  Lifelock Ultimate Plus insurance is designed to reduce public exposure of your details, monitor the Dark Web for your personal data, and protect stolen funds, it is not without issue. Data breaches at LifeLock and Equifax in recent years might leave you wondering if they can be trusted.

Finally, these services offer their products at different prices points. 

How does credit monitoring work?

If you choose to sign up to an ID theft protection service, you'll find that credit monitoring is the most vital part of the service. But how does it work?

Credit monitoring is straightforward: the company providing the service monitors your credit record for any changes. These are then passed to you as alerts, and if there is anything unexpected you can follow it up.

Some companies add to the basic credit monitoring with ancillary features. For example, some will check if medical care is being received in your name. They can also offer increasing degrees of insurance, from basic protection levels to more comprehensive cover.

At the heart of this is the basic idea of credit monitoring. The service monitors your credit file, relying on all available credit agencies for data. Notifications can be sent by email, or SMS.

But you're basically paying for the ability to have your credit record checked. This is something you can already do yourself. So, do you really need to pay for credit monitoring?

You can protect your identity for free

While paid solutions seem to be increasingly common, you may prefer to protect your identity for free. Several free-to-use tools and services let you monitor your credit and protect your ID for no more than the cost of your internet connection. 

  • Track changes to your credit score: card issuers, and some personal finance websites (e.g. Credit Karma) can help you keep an eye on your credit report for free.
  • Report identity theft: government and financial institutions already provide free reporting tools, so there is no need to pay for this service.
  • Freeze your credit file: perhaps the most valuable tool against identity fraud, you should keep your credit file frozen when you're not applying for credit. 

Does credit monitoring work?

With so many options available to keep an eye on your credit status, you might be left wondering how many people are caught by identity fraud. Does credit monitoring really work?

Well, yes it does. But whether it works for you is another matter entirely. It requires proactive attention to your financial situation, whether you pay for the service or check your credit file yourself.

After all, you need actually read the alerts that credit monitoring services send.

As far as identity theft protection goes, it's only as good as the company providing it. This may not be the reassurance you need. Research a protection policy thoroughly before using it, and check for reviews of the service to see if it meets your requirements in practice.

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Should you pay for identity theft protection and credit monitoring?

Can you afford the monthly outlay for credit monitoring? If you're concerned about identity theft, then protection seems a good idea - but is the risk real? Is it worth paying to avoid it? And can paying to top identity theft actually stop it from happening?

Identity theft protection services are mostly affordable and can give you good results. But there isn't really a strong reason to pay for a service that replicates most things that you can do for free. 

Ultimately, if you're happy to pay and can afford it, then it won't hurt. However, it's fair to say that subscription identity theft protection and credit monitoring is little more than a digital placebo. You can get better results for free with SMS alerts, improved awareness and vigilance, and better security practices.