If measured by questions I am frequently asked, identity theft is the topic of the year for 2014. A few recent high-profile credit card data breeches, combined with some media hype, are likely playing into this new-found awareness. But awareness is a good thing since there are very simple steps you can take to minimize your chances of being a victim.
Identity theft comes in many forms, from credit card data theft (the most common and least personally damaging), to full-blown identity theft where someone is obtaining loans in your name and engaging in other activities that can take years to clean up. We discussed credit card data theft in my January client letter, but what about the more severe forms of identity theft? Here are the steps you can take:
Level 1: Personal Responsibility
There are some basic things you need to do for yourself, and they work:
- Buy a shredder and shred all personally identifying documents before they hit the trash or recycle bin.
- Get sensitive information out of your mailbox. Either retrieve your mail when it arrives, or ask the sender to switch to a more secure encrypted delivery method, such as e-statements (not email).
- Keep your computer secure. Don’t visit questionable websites, and don’t click on flashing boxes that say you have a virus (you don’t, but you will if you click it). Maintain anti-virus and malware protection.
- Have a unique password for every electronic service you use and change it often (try LastPass to handle this for you).
- Don’t check your bank accounts or do other sensitive activities while on a public wireless network (eg. Starbucks).
- Keep your social security numbers and other identity information out of your wallet or purse where it can be easily lost or stolen. And storing it in an unencrypted note on your iPhone isn’t any better. Store this data on a secure and encrypted computer, or in a lock box.
Level 2: Opt-Out of Sharing Your Credit Data
Visit www.optoutprescreen.com and tell the credit reporting agencies that they can no longer sell your credit information to interested buyers. The Fair Credit Report Act permits them to do this, but also gives you the right to opt-out if you choose.
This will stop the flood of credit card offers in your mailbox, significantly reducing your junk mail volume and eliminating one easy way to open a credit account in your name.
Level 3: Monitor Your Credit
At a bare minimum, review a copy of your credit reports every year by visiting www.annualcreditreport.com. This will help you identify if any accounts have been opened in your name.
Better yet, sign up for a credit monitoring service such as LifeLock (there are many to choose from). These services cost very little, and you will receive alerts any time there is activity on your credit report, such as an inquiry for a new line of credit.
Level 4: Place a Fraud Alert on Your Credit File
Placing a fraud alert is easy and free. When you place a fraud alert on your credit file, creditors must contact you personally before opening a credit account in your name. The alert is good for 90 days, so mark your calendar to reset the alert each quarter. You also only need to contact one credit reporting agency to set the alert — they are required to share the alert with the other agencies.
With a fraud alert on your file, here is what happens: You walk into a car dealer to buy a car and sign up for a loan. The loan officer gets a puzzled look on their face while staring at their screen and says there may be a problem. A few moments later your cell phone rings, and a representative from the loan company takes a few moments to verbally verify that this is really you applying for a loan. After the verification is done, the loan goes through without a problem.
It’s pretty easy to see how this setup would prevent a fraudulent loan from being made. Instructions for placing a fraud alert are here: http://www.consumer.ftc.gov/articles/0275-place-fraud-alert
Level 5: Place a Security Freeze on Your Credit File
A security freeze, as the name implies, freezes all activity on your credit report. Even you won’t be able to obtain a loan without first suspending the security freeze. Depending on where you live, there may be fees associated with both placing and removing the security freeze. And you must contact each credit reporting agency individually to place a freeze.
This article from the Huffington Post has a good explanation of the process, and links to each credit reporting agency you need to contact.