You should watch your accounts. I use Credit Karma and they will send you alerts and updates for various credit events (account opening/closing, paying off a balance, etc). It's free. Edit: They only monitor TransUnion and Equifax data; not Experian.

If you don't want to pay for LifeLock, which I agree is a bit steep, you can usually get an identity theft protection policy from most major insurances companies. The premiums vary, but are usually a fraction of LifeLock's fees. Just be sure you understand what's covered.

I use both of those and it costs me $25/yr total.

You can check the Fair Credit Reporting Act for more information about various parties' responsibilities in handling your credit information. However, I don't think you'd be able to sue lenders/creditors in this case. They are distinct from the credit reporting agency that seems to be at fault.