How to monitor your credit rating

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Growing paranoia about identity theft is creating a boom for companies that provide credit monitoring, fraud alert and other services that purport to protect you from this crime.Each of these services typically cost about $60 to $200 per year.Credit monitoring alerts you when certain changes occur in your credit report. If you weren't aware of these changes, someone could be posing as you.Fraud alert places a notice on your credit file and renews it every 90 days. The alert asks lenders to contact you before extending credit.Virtually every consumer organization says these services aren't worth the money because they are pretty easy to do yourself for free and because they won't detect or prevent many types of identity fraud.Yet 33 million consumers subscribe to credit monitoring and 32 million are enrolled in fraud-alert programs, according to Javelin Strategy and Research. Some of these people could be getting services for free because they were victims of a security breach.Both services require access to your credit report at the nation's three credit bureaus -- Experian, Equifax and TransUnion.These reports consist solely of information that your creditors report to the bureaus about your account.Many creditors report to all three bureaus but some report only to one, so your three files might differ somewhat.Here's a closer look at what these two services do -- and don't do -- and how you could do them yourself.Credit-monitoring services promise to notify you about "key" or "critical" changes in your credit report. These might include new credit accounts opened in your name, address changes, credit inquiries and an increase in credit limit.How soon you are notified about a change also varies. Equifax offers three levels of service: Two provide daily notification but the cheapest provides weekly notification.Some services monitor only one bureau, though, so if a thief opens a credit card in your name with Bank X, but Bank X doesn't report to that bureau, you won't be notified. Monitoring all three bureaus often costs more.Major vendors include the three bureaus themselves or their subsidiaries. FreeCreditReport.com and ConsumerInfo.com are part of Experian. Others include Affinion and Identity Guard. Many banks and credit card companies offer monitoring as well.Jeff Ridout, a spokesman for Consumer Action, calls credit monitoring "an unambiguous waste of money. It won't prevent a (fraudulent) account from being opened. It's like buying life insurance after the body is cold."By law, each of the three credit bureaus must give you access to your report once a year at no charge. To get this free report you must go to www.annualcreditreport.com.Note: When you get your free report, you will still have to pay if you want a credit score -- a numerical rating based on the information in your credit file.Some credit monitoring services offer free scores and more than one free credit report per year.To settle a decade-old class-action suit, TransUnion recently agreed to provide free credit monitoring services for six to nine months, but this service monitors only TransUnion. Consumer groups say TransUnion could come out ahead on this "settlement" if consumers agree to pay after the free period ends.Another federal law lets consumers place a fraud alert on their credit file for free. Creditors are supposed to verify the identity of consumers with fraud alerts before granting credit, and most usually do.You only need to request a fraud alert from one bureau; it will notify the other two and you should receive confirmation that it has been placed at all three.The problem with fraud alerts is they must be renewed every 90 days.Providers include LifeLock, Debix, Trusted ID and MyTruston. A typical cost is $10 per month.Unlike credit monitoring, fraud alerts can prevent someone from getting credit in your name, but they can't protect against all types of identity theft."If you want to protect your yard, and you fence in one side, it will protect you from any dog coming in that side of the yard. But the dog might be smart enough to run around the fence" and come in another way, says Jeff Blyskal, senior editor of Consumer Reports.A more effective way of preventing credit fraud is asking for a credit freeze, which locks down your credit report and prevents anyone -- including you -- from opening new accounts. It also prevents prospective employers and landlords from checking your report.You must contact each of the three bureaus separately to request a credit freeze, which stays in place until permanently liftedThe cost varies by state, and victims of identity theft can often get a freeze for free.Paul Stephens, director of policy and advocacy for the Privacy Rights Clearinghouse, says none of these safeguards -- including a credit freeze -- can prevent other types of identity fraud. Examples include existing-account fraud, debit card fraud, medical ID theft, use of Social Security numbers not involving credit, and criminal ID theft.A new crop of companies say they can help prevent these other types of fraud by monitoring public records, scanning Internet chat rooms where Social Security numbers are sold and other data-mining techniques.Most are new and unproven.E-mail Kathleen Pender at kpender(at)sfchronicle.com(Distributed by Scripps Howard News Service, www.scrippsnews.com.)