ID theft protection services: Are they worth the money?

We've all heard of people experiencing identity theft. Maybe it's happened to you or someone you know.

And because it's on the rise, it's not surprising that several companies are offering identity theft protection services.

The experts at Consumer Reports say it's important to know how the coverage works, and take a close look to see whether or not it might be worth your money.

Andrea Ferrero teaches young people about finances, which unfortunately also includes learning about identity theft.

And she should know - Andrea had her identity stolen a few years ago.

But, she was lucky.

She had enrolled in an identity theft protection service, which quickly informed her that someone had used her information to get a large amount of credit in her name.

"They walked me through the steps to take to dispute the line of credit that had been opened and take care of that," Ferrero said.

But before you enroll in one of these services, the experts at Consumer Reports say you need to know what you're actually buying.

Some people assume ID protection services will prevent identity theft in the first place.

But that's not true.

Margot Gilman, the money editor for Consumer Reports, explains:

"Consumers pretty much have to accept that criminals can get their hands on your personal information no matter what you do. The key is to spot fraudulent activity quickly and then do what you have to do to stop it," Gilman said.

ID Theft protection services like Andrea's can help you dispute fraudulent transactions with your bank, credit card companies and other businesses after your identity has been stolen, typically for a fee of about $10 to $30 a month.

The best way to avoid being a victim of this type of new-account fraud is something you can do yourself.

Freeze your credit with the major credit bureaus - Equifax, Experian and Transunion.

It's free, and no one will be able to open credit, including you, until you unfreeze it.

But keep in mind: freezing your credit won't prevent all ID theft.

For instance, a criminal can still use your personal information to get medical services or steal your tax refund.

Gilman said, "It's critical that consumers themselves keep a careful eye on their financial world -- bank and credit card statements obviously, but also medical records, insurance records, tax records."

Consumer Reports says if you're considering signing up for ID theft protection, ask a lot of questions -- some companies may cover very little or simply hand you a do-it-yourself credit repair checklist.

Another thing you should do yourself in any case -- check your credit report free once a year with the three credit bureaus to spot any suspicious activity.