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credit card fraud
social security numbers
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How Does Lifelock Work? What The Service Provides
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How Does Lifelock Work? What the Service Provides

With all of the news about identity theft, credit card fraud, and hackers penetrating high-profile companies, it comes as no surprise that people are looking to protect themselves. Services have emerged over the past several years claiming to help protect your identity, but what does that really mean?

The most prominent advertisements have come from LifeLock, a company whose CEO, Todd Davis, freely places his social security number on TV, billboards, and all across the Internet. These ads are often shocking to most people because we have been trained to avoid giving our social security numbers to anyone, let alone strangers online. So, this leads many to ask the question, how does LifeLock work, and what good can it possibly do?

This company has only been in business since 2005 which seems like a very short period of time for such blatant advertising campaigns. However, in that short timespan, they've managed to become very near to a household name, but few know what services are actually provided, nor do they understand how the business model is even relevant. I'll try to clarify some of these questions and let you know how you can implement some of the techniques that the company uses on your own.

“Identity theft” is a commonly misunderstood term, but it's a term that nearly everyone has heard. The actual definition is “using someone else's personal information to obtain credit or financial gain”. For example, if I were to steal your wallet and buy something with your cash, that is not identity theft, it's simply “theft”. However, if I were to somehow gain access to your credit card number, address, and phone number and then use that data to purchase a product for myself, that would qualify as identity theft.

So how can some third-party company prevent this?

Well, they can't entirely.

What these services typically provide is advanced monitoring of your personal data in order to detect potential misuse by criminals. For instance, if your passwords are compromised by hackers, there actually exists a huge illicit market for buying and selling personal information on which they may attempt to sell your data. When someone purchases these passwords, they will attempt any number of devious schemes to funnel money out of your accounts or apply for loans using your credit.

LifeLock, and other services like it, have tapped into these vast underground markets in order to catch your personal data long before it is used for illegal purposes. They monitor these trading networks and scan them continuously for their clients' name, address, social security number, and any number of personally identifiable keys. When they catch wind that your personal data is floating around on one of these networks, they take a number of steps to block further damage.

First, you are notified that you have been compromised. This is a clue that you need to change all of your passwords (tip, never use the same password on more than one site!).

Second, they notify credit bureaus that fraud is highly likely on your account, so a fraud alert is placed on your credit file. You can place these yourself, although they expire after 90 days, so if you do it manually, you need to set yourself a calendar reminder every 3 months to renew them.

In addition to monitoring criminal databases, they also monitor your bank accounts, credit accounts, credit report, and public records. Whenever someone applies for a loan or creates a suspicious-looking transaction, you are notified. If you're already vigilant in tracking your financial statements on a regular basis, this may not be of much use to you. But, if you're like me, you probably only check your credit report once a year at best, and you most likely never check public records for your own name. Identity fraud protection companies will continuously monitor this data, so you're always one step ahead of the criminal element. The faster you can catch fraudulent behavior, the better off you'll be.

Most of these companies also offer a limited form of insurance so that if your accounts are ever accessed fraudulently and your bank doesn't reimburse you for all of the damages, you can file a claim to recover the remainder. Each company has a different policy, however, so it's best to read the insurance offer carefully.

The Bottom Line

In my opinion, these are the primary benefits of a service like LifeLock. Some of these tasks aren't difficult to handle yourself, but monitoring criminal networks isn't exactly on my list of things I enjoy doing. For the extra protection and knowledge that I'm covered in case of identity theft, I'm willing to pay a small monthly fee. However, everyone's personal situation is unique, so it's ultimately up to you. I can, however, guarantee that LifeLock is not a scam. The services are valuable, and I feel the benefits outweigh the expense.

In fact, in October of 2011, LifeLock's service was awarded best in classfor identity theft prevention by Javelin Strategy & Research, the leading research organization for the global financial services industry. Todd Davis' company has worked with local and federal law enforcement agencies around the United States and the world to educate officials on the dangers and warning signs of identity theft. I'd say they have earned their household name reputation and have succeeded in providin an extremely valuable service in today's high-risk environment.


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