If you host your WCF services in IIS7 there is small trick you have to do to make it work. You have to change your application pool identity to Network Service.
You can do this by expanding your IIS Server --> Application Pools --> Right Click and Select the Application Pool Advance Settings
In the popup window click the Identity under Process Model
Change the Identity to Network service.
Give NetworkService access to the physical folder of the wcf site. and you are good to go.