How does identity theft protection work? Stop would-be scammers fast

There are different components; each offers ways to protect your financial identity

Representational image depecting cybersecurity protection
(Image: © Shutterstock)

Online scamming has led to a significant increase in identity theft. Luckily, reputable companies have stepped forward to offer identity theft protection services. By signing up, you're better prepared to stop would-be thieves from stealing identifying information like Social Security numbers, bank accounts, and more. 

Are identity theft protection services worth it? Here's a look at the pros, cons, and costs of these services. 

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As previously noted, identity theft is an ever-growing problem.  The U.S. Federal Trade Commission (FTC) said that consumers filed 5.7 million fraud reports in 2021, valued at more than $5.8 billion. Of these, one-quarter were specific to identity theft, which saw a 113% increase year-over-year.

There are eight types of identity theft. These can include government documents or benefits fraud, which typically involves someone using someone else's Social Security number, credit card fraud, and loan or lease fraud. There's also phone or utility fraud, banking fraud, employment or tax-related fraud, medical identity theft, and child identity fraud.


(Image credit: Lucia Grzeskiewicz from Pixabay )

What's identity theft protection? 

Identity theft protection is a blanket term to describe the various services designed to better protect individuals from those looking to profit from stealing their identity. These services break down into four broad categories: identity monitoring, credit monitoring, identity recovery, and identity theft insurance. 

Identity monitoring

Identity monitoring services can automatically scan the web and online databases for someone's personal information such as Social Security numbers or email. If this information is found somewhere it shouldn't be (on the dark web), the service provider can decide whether this information has been misused or part of known data breaches. 

Unlike other identity theft services on this list, identity monitoring is preventative because nothing has happened to harm someone's identity yet. However, when potential breaches are found, the services present a list of solutions to resolve the issue. 

For example, let's say your email is part of a significant retail store breach. Under this scenario, an email and password could unlock your credit cards and other identifying information to the criminal. When a violation is detected, you can quickly change your retail account password or close the account entirely so criminals can't use the account for nefarious reasons.

Identity monitoring services cost anywhere from $5 to $30 per month. In addition, many packages also include credit monitoring services. 

Credit card

(Image credit: Michal Jarmoluk from Pixabay)

Credit monitoring

Through a credit monitoring service, individuals can quickly access their credit reports and credit scores using various online tools, both free and paid. Designed to uncover potential identity theft in real-time, credit monitoring services provide alerts whenever changes are detected. With this information in hand, consumers can quickly determine whether the changes are appropriate — or a sign that identity theft is taking place. 

Among the types of transactions a credit monitoring service can detect include:

  • New account openings 
  • Unauthorized transactions on current accounts
  • Address changes
  • Late payments
  • Closed accounts
  • Other suspicious activity

Credit monitoring services come in free and paid flavors. Identify which features are most important and choose a service that best matches those needs—the paid packages run between $5 and $30 per month. 

Identity recovery

With identity recovery services, a consumer gets a helping hand when something has happened, and it's time to resolve the issue. These service companies can assist with freezing credit reports, draft letters to credits indicating theft has occurred, and contact law enforcement as needed. 

Victims can go through the identity recovery process without a third party. However, it's likely to take more time. At the minimum, victims should review the FTC's free recovery place service (opens in new tab)

Paid services for identity recovery are priced between $15 and $30 per month. 

Identity theft insurance

Identity theft insurance is a service designed to cover the costs associated with ID theft. A subscriber will receive reimbursement for any monies spent on reclaiming financial identities and repairing credit reports by paying a monthly or yearly fee. 

Identity theft insurance is built-into homeowners' and renters' insurance policies. Separately, packages are priced at $25 to $50 a year. In addition, all policies have deductibles to consider;  these costs must be paid before the identity theft insurance begins paying. 

Policies cover a range of topics, including: 

  • Credit report costs
  • Phone calls
  • Lost wages
  • Notary fees
  • Document mailing
  • Legal fees
  • Child care costs
  • Credit monitoring services

Is identity theft services worth it? 

Consumers should at least take advantage of the free identity theft services on the market, then consider the paid options. Regardless, you should always have a handle on what's happening on your credit report and note irregular changes. We've identified the best identity theft protection tools of the year and the best credit monitoring services.

Bryan M Wolfe

Bryan M. Wolfe is a staff writer at TechRadar, iMore, and wherever Future can use him. Though his passion is Apple-based products, he doesn't have a problem using Windows and Android. Bryan's a single father of a 15-year-old daughter and a puppy, Isabelle. Thanks for reading!