Helping Credit

*If you’ve worried lately that thieves might steal your identity, it’s no wonder. Companies in the protection business are working hard to fan your fears. “Identity theft is on the rise,” warns Experian’s TripleAlert.com. LifeLock raises the alarm that ID theft is “one of the fastest growing crimes.” And a news bulletin on the Identity Guard Web site includes the headlines: “2007 Record Year for Data Breaches” and “Dog Becomes Victim of Identity Theft.”
Those companies pitch a variety of pricey solutions. But you can hold on to your cash and still shield yourself from ID theft. For starters, the number of identity thefts has declined 23 percent over the last four years, a trend expected to continue until at least 2013, according to Javelin Strategy and Research, a California firm that surveys about 5,000 adults on the subject each year. In addition, full-blown ID theft—where someone opens new credit-card accounts or commits other crimes using your name, Social Security number, or other information—is relatively uncommon, occurring in only 1 percent of all U.S. households in 2005, according to the U.S. Department of Justice.

The most common form of ID theft is old-fashioned credit-card fraud and check kiting: Someone uses an existing credit- or debit-card account to steal money and then runs. So the bulk of ID theft—71 percent, in fact—is nothing new. What’s more, in most cases, your liability is legally limited and card issuers or banks pay the direct losses, not you. About 60 percent of ID theft victims paid nothing out-of-pocket in 2005, the Federal Trade Commission says. But this fraud still cost 8.3 million consumers a total of about $3 billion in 2005, along with the angst and time involved in resolving the problem.

Fear of ID theft has spawned a protection industry that sells a variety of services. Some monitor your credit reports to detect fraudulent accounts. Some place fraud alerts on your credit reports to encourage lenders to verify that the person trying to open a credit line in your name really is you. Others offer ID fraud detection, scouring Internet chat rooms and black-market Web sites for mention of your name, credit-card numbers, or Social Security number.

We scrutinized more than a dozen products. If a couple bought them all to get a full menu of services with minimal overlap, they could easily spend more than $1,000 the first year alone. But you can avoid such expenses and still protect yourself. Here are seven steps you can take, along with our assessment of the paid protection related to each.

*Consumer reports Money Advisor