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Britain's two largest credit reference agencies, Experian and Equifax, last week began offering online credit reports services designed to help combat ID fraud.

Experian's CreditExpert service alerts consumers by email or SMS text when important changes have taken place on their credit report, which they can access online to determine if the changes are an early indication of fraud. The service costs £49.99 per year (after a free 30 day trial).

On Friday, Equifax launched a more limited service (MyEquifax) which allows individuals to view their credit file online for £8.25.

Online credit monitoring is well established in the US and the two companies hope to extend the similar services into Europe, where ID theft is becoming a growing problem.

More than 32,000 cases of identity theft were identified in the UK in 2002, double the number of the previous year, according to Experian. The company reckons ID theft costs the UK economy £1.3 billion per year.

Isn't this a sign that lenders are insufficiently thorough in extending credit, we asked?

A spokesman for Experian was keen to highlight the increased sophistication of crooks and lack of awareness by the public about the need to keep their personal information safe as among the factors leading to the increased prevalence of ID fraud.

He did however concede shortcomings with the system.

"We live a society that demands fast decisions, and that leads to fraud opportunities. If someone can create a sufficient number of paper-based IDs there's a good chance they'll be able to obtain credit. There are loads of loopholes, such as mail redirection, open to abuse," he said.

Experian's response to the problem is to "empower the consumer" to know what is done with their account. "CreditExpert shuts a window of opportunity which can last from six to eight weeks or longer before someone finds out a fraudulent line of credit has been established in their name," our man at Experian told us.

"Consumers signing up to CreditExpert will be made aware of potentially fraudulent activity far more quickly than had been possible previously," said Richard Fiddis, Experian's Chief Operating Officer, UK and Ireland. "The result is that lenders can be made aware of potential fraud early which will reduce losses and let them better help consumers to correct their files following identity fraud."

Which us all very well until we consider how difficult credit reference agencies can make it for victims of ID fraud (here's an example).

In response to this point, Experian said it has a dedicated victim-of-fraud team, which helps victims' liase with lenders in cases of fraud.

"Every single account falsely created needs to be closed, which takes time. Prevention is easier than cure," a spokesman said.

But is it right that consumers should pay to police fraud? What about the responsibility of the banking and credit system to take responsibility in identifying fraud at the application stage? Experian said its credit card fraud detection services (detect) and hunter fraud prevention service did exactly that but that other forms of anti-fraud protection were also necessary.

"That's why we're promoting CreditExpert, which costs £5 a month - around the price of a cost of cigarettes, as a way of allowing consumers to take the initiative," an Experian spokesman told El Reg. ®

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