Do I need identity theft protection?

Woman on laptop learning about identity theft protectionImage: Woman on laptop learning about identity theft protection

In a Nutshell

Protecting yourself against identity theft requires regular monitoring of your credit reports and bank accounts, as well as safe storage of your personal and financial information. But that can be a lot of work. Here’s what you need to help keep your information safe.
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Are you concerned someone might steal your identity?

Identity theft happens when someone uses your personal information, like your name, credit card data or Social Security number, without your permission. It can result in anything from damage to your credit reports to a loss of financial assets.

Fraudsters can access this info in different ways. Sometimes it’s simple, like fishing your bank statement out of the trash. Other times, it can be as sophisticated as pulling your personal information from a hacked website.

The good news is that no matter how creative the thief is, there are a number of ways to help protect your information and work to recover from identity theft.

What is identity theft protection?

This blanket term refers to a variety of services aimed at giving people some protection against identity theft and fraud. Identity theft protection can include credit monitoring, ID theft monitoring and other services that help you respond if you are, or have been, targeted. It’s different from identity theft insurance. 

Here’s a look at each type of ID theft protection services, including how it can help you and whether it’s worth paying for.

Credit monitoring

What it does

Credit monitoring tracks activity on one or more of your credit reports and alerts you when there are changes. This can include changes made to your contact information, a new account being opened or a credit limit that’s been increased.


Is it bad when my credit limit increases?

Not necessarily. When a creditor automatically increases your credit limit, it can be a sign that you are trusted to repay larger debts. A credit increase can also improve your credit scores, as long as your balance doesn’t increase. For this reason, it’s not a bad idea to request a periodic credit limit increase. But a credit limit increase can be a sign of fraud if it was requested by someone other than you.

Is credit monitoring worth paying for?

Credit monitoring doesn’t extend to any noncredit accounts or databases, so it’s ineffective for catching activity with things like bank accounts or Social Security information. Plus, it’s not preventive; it simply alerts you to signs of fraud after it happens.

You can use Credit Karma’s free credit-monitoring service to help detect signs of fraud or unusual activity.

Identity monitoring

What it does

Identity monitoring services scan web information and public databases (sometimes credit reports too) for unusual activity, and then alert you if this activity has taken place.

Is identity monitoring worth paying for?

Each monitoring service varies in terms of the databases it searches and the frequency of those searches. You may find identity monitoring advertised for only a few dollars a month, but before signing up, make sure you understand exactly what information is monitored, how often it’s monitored, and any fees involved.

You can sign up with Credit Karma to get free ID monitoring, which includes alerts when your personal information is exposed in another company’s public data breach, or when there’s an indication that your passwords on other sites may be compromised.

Identity recovery services

What they do

These services contact the proper agencies and creditors to set up roadblocks against further loss and help you in efforts to write letters to creditors and debt collectors.

These services can include advising you on the correct requests and documentation to submit to creditors or fully representing you in all communications with the agencies involved, if you permit them to do so.

Are identity recovery services worth paying for?

This is yet another service that’s billed as a protection but actually only responds to a problem. It’s also something you can do for yourself for free. The challenge is that you may not have the time or the energy to devote to the process.

If you’re looking for help or guidance, consider using the Federal Trade Commission’s Personal Recovery Plan, which is a free, comprehensive service that walks you through the ID theft recovery process and even assists by prefilling forms and letters.

Identity theft insurance

What it does

This coverage will reimburse you for certain costs involved with restoring your stolen information and assets. Identity theft insurance may be added to your renters or homeowners insurance policy as additional coverage.

Is identity theft insurance worth paying for?

Coverage may not cost much, but it won’t typically include reimbursement for what was stolen. Instead, it covers up to a certain amount of the expenses involved with recovering your assets, like legal costs or notary fees. Your loss may be better protected with your preexisting renters or homeowners policy, or even by laws that limit your liability for unauthorized credit card or debit card charges.

What else you can do to help prevent identity theft

Your best bet against identity theft is to practice safe habits. In general, that means being mindful of where you store documents with personal or financial information, both online and in hard copy (be sure to shred hard copy documents once they’re no longer needed).

Here are some other measures you can take:

  • Regularly monitor your credit reports. Check your reports for unusual or unfamiliar activity. You can check your Equifax® and TransUnion® credit reports for free on Credit Karma. You can also pull all three of your credit reports for free, once a year, from
  • Opt out of prescreened credit offers. Reduce the likelihood of someone intercepting your credit card offers in the mail or retrieving them from the trash. Call 1-888-5-OPT-OUT to stop creditors and insurers from sending you prescreened offers for five years. To stop them permanently, visit
  • Choose strong passwords. Avoid using full words, numeric sequences (like “1234”) or other predictable patterns. A strong password should be long, random and include both special characters and numbers. Consider using a password manager, a secure tool that saves your passwords for you so you don’t have to remember them.
  • Read emails wisely. Be wise about who you share information with online. Avoid clicking on anything suspicious or opening attachments, especially if the email contains a solicitation or a request for your personal or financial information. Be skeptical.

What to do if you’re the victim of identity theft

If you’re the victim of identity theft, you can respond by taking a few actions immediately:

Set up a security freeze

This completely stops lenders from viewing your credit reports, which means most lenders won’t open new accounts in your name. Even if you want to open a new account in your own name, you’ll have to unfreeze your credit.

Setting up a security freeze is free. To request a security freeze, contact each of the three major credit bureaus: Equifax, Experian and TransUnion.

Set up a fraud alert

You can set up an initial fraud alert or an extended fraud alert for free by contacting any one of the three national credit bureaus.

An initial fraud alert entitles you to an extra copy of your free credit reports and notifies lenders that you may have been the victim of fraud or identity theft. It also means lenders must check with you before opening a new account — a requirement that extends for one year.

This can be useful if you’ve recently had your wallet stolen or lost a credit card, but can also be a preventive measure.

If you’ve already been a victim of identity theft, and you’ve filed an identity theft report with any of the three national credit bureaus, you can set up an extended fraud alert, which last for seven years.

With an extended fraud alert, lenders are required to verify your identity before issuing new credit. An extended fraud alert also entitles you to two additional free copies of your credit reports.

Bottom line

Identity theft protection services can help you by monitoring your information, alerting you when something suspicious has happened or reducing the cost of recovering from fraud.

But identity theft protection services can’t prevent you from having your identity stolen. The best defense against identity theft is to always protect your sensitive information and to respond quickly when you suspect signs of fraud.

About the author: Sarah C. Brady is a San Francisco–based financial consultant, workshop facilitator and writer. In addition to writing for Credit Karma, Sarah writes for Experian, LendingTree, Magnify Money, MSN News and more. In her … Read more.