The Nuclear Option: Security Freeze

The third option beyond monitoring and alerts isn't pretty.

"Rather than relying on fraud alerts or spending $100 to $180 a year on credit monitoring, consumers should consider a security freeze," says Beth Givens, director of the Privacy Rights Clearinghouse. "Depending on how often you use it, a freeze can be an effective way to prevent identity theft and a lot cheaper than credit monitoring."

With a freeze (which you can set up yourself for a small fee), credit bureaus won't release your report at all--not ideal if you need to obtain a mortgage, change cable providers, apply for a job, or do anything requiring a credit check. Freezes are free for identity-theft victims in most states, Givens notes.

TrustedID can set up a freeze for you for $15 plus any credit bureau fees, but you must mail it a power of attorney form. Or you can do it yourself via certified mail. The rules and fees vary depending on where you live, but the cost is usually $10 per bureau. (Consumers Union has a guide to each state's laws.)

If after freezing your account you decide to change your cable plan or apply for a loan, you'll probably have to pay $10 per bureau to unfreeze your account for a specific creditor or a certain period of time. And because credit bureaus tend to move at glacial speed, you should make an unfreeze request long before you actually need it. Even with a freeze in place, identity thieves can use your medical insurance, ruin your eBay reputation, or apply for jobs with your name and résumé. Identity protection services can't prevent such problems, says Linda Foley, director of the Identity Theft Resource Center and an identity-theft victim.

Identity protection services may help people who can't be bothered to take the necessary precautions or who lack the resources to protect themselves. But you should choose carefully, read the fine print, and resist acting out of fear.

"I would say 'Buyer, beware,'" says Foley. "There is nothing you can buy that will keep you from becoming a victim of identity theft--and if there was, I'd be the first in line to buy it."