Judge's ruling against LifeLock both good and bad for consumers

A recent federal judge's ruling says that LifeLock is breaking California law when it puts credit alerts on consumer files at credit reporting agencies.

The lawsuit was brought last year by credit reporting agency Experian, which alleged that LifeLock was abusing the fraud alert system to make money off its customers.

Fraud alerts came on the scene in 2003, when a new law allowed consumers to put alerts on their credit files if they believe they have been a victim of identity theft or are at serious risk of becoming a victim of identity theft. The fraud alert means that creditors are supposed to contact you directly before opening a new line of credit in your name.

In reality, that doesn't always happen. Creditors may see a fraud alert on your report, but not take any steps to verify that it's really you trying to obtain credit. The law says they should try to phone you at the telephone number on your credit file, but beyond that, there's no guidance and apparently little recourse if the creditor doesn't follow through. For this reason, I caution consumers against putting much faith in the fraud alerts to begin with.