Falling victim to identity theft is no joke. At its mildest, a small-time crook who finds your lost wallet is able to make a few purchases before the credit cards are canceled. The credit card issuers relieve you of any responsibility for the fraudulent charges and you're left with only the creepy knowledge that someone out there might still be carrying around your driver's license and pictures of your kids.
In a more sophisticated case, that crook waits a year to quietly obtain credit in your name. He scores big and then vanishes. After a few months of nonpayment, creditors start to track you down. By the time you uncover the heist, the fraudulent accounts are in collections and the culprit is long gone. The effort required to clean up the mess is at least equal to a second job, and it could take years to accomplish.
In either case, if you were hoping to get financing of your own for a major purchase (like a home), your plans will be immediately derailed, possibly for long enough to completely kill the deal.
Things you should be doing every day to protect yourself from identity theft
Do your part to make it hard on thieves looking for easy money. These are not one-time suggestions; they are lifestyle tips. Make these five actions part of your normal routine and you'll drastically mitigate the risk of being taken advantage of. You'll also sharply limit the damage that will occur in the event you do happen to forget your wallet on a retail counter someplace and an unscrupulous person finds it.
1. Review your credit reports every year. This is a no brainer. Most of us know we can get a copy of our credit report every twelve months from each of the three major CRAs (credit reporting agencies) – Equifax, Experian and TransUnion. But some people are confused about how to get them (you must go to AnnualCreditReport.com and no other site). (Hint: setting a calendar reminder to get your free credit report is as easy as setting the alarm on your cell phone.)
If you're too busy or lazy to obtain and review your reports regularly, you have two options. (A) Pay for credit monitoring by one of the CRAs or any one of a number of online services; (B) Sign up for free credit monitoring from a site like CreditSesame.com or CreditKarma.com. The only drawback to option (B) is that you'll only see data from one CRA (Experian and TransUnion, respectively).
In any case, monitoring your credit reports can only tell you what has already happened, when it's too late to prevent it. So let's talk about prevention.
2. Shred every piece of trash that contains information about you. Some thieves can use just two pieces of data, like your name and address, to obtain more sensitive information. So shred even your discarded junk mail rather than just tossing it into the bin. (Hint: tear off and shred only the portion of the page where your name and address appears, and throw away the rest.)
3. Keep your social security number private. Very few people have a true need to know your social security number. Your financial institution and your employer require it, but your doctor's office and utility company do not. If the customer service rep says they do, ask to speak to a supervisor. A company doesn't need your social security number unless you plan to request some type of financing (if so, they'll need it in order to run a credit check and to have a means for tracking you down in the case of nonpayment). Consider paying a cash deposit instead when you sign up for cable TV service, for example, in which case your social security number is irrelevant. (Hint: most insurance carriers will not allow a doctor or dentist to refuse service because you decline to provide your social.)
4. Be suspicious of every website where you enter your credit card number. Always verify that you're on the right website and not an imposter site that's out to steal your information. Look for https:// and the padlock icon in the url every time. (Hint: draw a padlock on your credit card with a Sharpie to remind you to keep an eye out for secure websites.)
5. Be suspicious of every email from a financial institution or merchant. Legitimate merchants will never ask you for your social security number. If you get an email that looks urgent, asks you to click a link to log into your account or to update your login credentials, or asks you to provide or "verify" your address, birth date or other personal information, do not click the link. (Hint: call the company or visit their website by typing the url yourself to find out if the request is valid.)
6. Place a security freeze on your credit. A freeze means that the credit reporting agency cannot release any data about you to a new lender or any other entity that you don't already have a financial relationship with. So if a new credit card application comes in, it will automatically be turned away. This is a truly preventive measure against identity thieves, but it comes at a price. Freezing usually only lasts about 90 days, and usually incurs a fee of between $3 and $10. You'll also pay a fee of $2 to $12 to "thaw" your file in order to let a legitimate application for new credit be processed. Some states allow you to temporarily thaw your file for a date range or specific party. Fees vary by state, and are waived if you can show that your identity has been compromised. (Hint: credit monitoring is backward-looking by definition. A credit freeze stops thieves before they start.)
Fraud is, unfortunately, a part of American life. If you don't protect your credit, who will?
Photo Credit: Shutterstock / JohnKwan
