How much would you pay to stop them stealing your ID?

For up to £60 a year, you can take up a service that alerts you to financial applications made in your name. Kate Hughes asks if it's worth it

To think that worries about identity used to be a matter of our own self-image. Some 65,043 Britons were victims of ID theft last year, according to Cifas, the not- for-profit fraud-prevention service. Behind these stark statistics are countless tales of consumers spending time and money trying to put things right, in the face of bureaucracy and distrustful lenders.

But help is at hand – or so it seems – with lenders and insurers increasingly offering ID theft-alert products to preserve your peace of mind.

These alerts are not the same as ID theft assistance, which helps you pick up the pieces after the event. Instead, they are preventive, monitoring your credit file with a view to stopping any fraudsters in their tracks. They alert you to any significant changes, or applications made for financial products using your name, address or other details.

The ID-alert products on the market all work the same way, co-ordinating with the big credit reference agencies, such as Equifax, Experian and Call Credit, to keep tabs on your records. But the range of add-on services, and prices, is considerable.

Protective Registration is a service offered by Cifas at www.cifas.org.uk. For an annual administration fee of £14.10, a "warning flag" is placed against your address. This means that when you apply for credit, insurance or other products such as mobile phone contracts, the provider will carry out extra checks to confirm that the applicant is really you and not a fraudster – though the process may lead to delays while your credentials are verified.

Elsewhere, insurers such as Norwich Union offer a full suite of ID theft prevention and assistance. This is marketed as a stand-alone package and will cost you £60 a year. It includes unlimited credit reports, along with up to £50,000 of insurance cover to pay for expenses such as legal fees and phone calls if you are the victim of identity fraud. Another service included is the registration of valuable documents such as your passport details.

ID-alert providers may work with the three main credit reference agencies in offering these services, but even Equifax questions their value. "The market for alert products is growing rapidly as awareness of the problem mounts. But there is some doubt as to whether they are worth it," says Neil Munroe, external affairs director. "Customers should decide what these products can offer them that they can't do for themselves.

"And it is worth remembering that at the moment you will still have to take some action yourself to sort out any problems if your identity is stolen and your credit rating affected," he adds. "At the moment, there are no products that take away all the hassle."

It should also be noted that, ultimately, victims of identity fraud shouldn't suffer any financial loss. Under the UK Banking Code, the lender that has accepted the fraudulent credit application will carry the can, unless it can prove that a customer has been negligent in disclosing his or her details – an extremely rare outcome.

What's more, some len- ders offer free alert services. The credit card firm Capital One, for instance, provides an early-warning system in which emails are sent to cardholders detailing any key changes on their credit file. The alert includes information on any borrowing applications that may have been made in their name, while customers also receive two full credit reports each year free of charge. Similarly, Barclaycard offers a free fraud-prevention helpline.

In the final analysis, though, the National Consumer Council (NCC) believes that the current patchwork approach of the banking sector to ID fraud needs to improve. "Everyone, but particularly those on low incomes, needs to be able to identify any fraud on their account immediately," says Russell Guthrie of the NCC. "Otherwise, it could leave those without a savings net penniless.

"Text alerts and more frequent statements increase visibility in banking and can also act as fraud detectors," he adds.

But so far the NCC's proposed one-stop shop for tackling ID fraud, available free to consumers and paid for by the banks, has only gathered limited support.