6 free ways to protect your ID
Identity theft affects millions, costs billions and is a nightmare to sort out. But you can get protection -- and it's free.
This post comes from Brandon Ballenger at partner site Money Talks News.
Earlier this year, I was a victim of identity theft. Nearly $500 was sucked out of my bank account by a Chinese business I had never heard of. My bank restored the money, but I still don't know how it happened.
That's small potatoes. A new Treasury Department report says the Internal Revenue Service may have paid out as much as $5 billion in tax refunds to ID thieves who filed fraudulent returns last year and projects $21 billion in similar losses to ID theft over the next five years.
What can you do? A lot. In the video below, Stacy Johnson explains a free, five-minute way to protect yourself from identity theft. Check it out, then read on for more details.
Many companies are looking to help consumers protect their identities -- for a price. You could pay some heavily advertised service $10 to $25 a month, or you can do what Stacy recommended in the video and use these strategies:
Add a fraud alert
A fraud alert placed on your credit file lasts 90 days. It requires potential creditors to use what the law refers to as "reasonable policies and procedures" to verify your identity before issuing credit in your name.
You sign up by filling out an online form. Your request is then sent to all three credit reporting agencies: Equifax, Experian and TransUnion.
You're supposed to use a fraud alert only if you think your information may have been compromised. According to the FTC:
You may ask that an initial fraud alert be placed on your credit report if you suspect you have been, or are about to be, a victim of identity theft. An initial alert is appropriate if your wallet has been stolen or if you've been taken in by a "phishing" scam.
But when the security of credit card information is so often compromised, many people probably feel justified in believing they could become a victim of identity theft.
Establishing a fraud alert is quick and easy, but it needs to be renewed every 90 days. There are all sorts of ways to remind yourself to do that.
If you've already been a victim of identity theft, you can get an extended fraud alert (.pdf file) by mailing a form, along with several identifying documents and a police report.
While fraud alerts are useful, they're not ironclad. They'll protect you from someone opening new credit in your name, but they won't help if a crook has your existing credit card information. They also can't prevent someone from opening accounts that don't require a credit check, like a bank account.
Get a credit freeze
More secure than a fraud alert is a credit freeze. This prevents anyone -- including you -- from opening a new line of credit until you remove it, a process that can take several days. It's not for everyone, and in some cases it may not be free. It's generally free for ID theft victims, but policies and fees vary by state.
You can learn more about your state's rules on freezing credit at the Consumers Union website.
Watch your credit
Identity theft protection packages often add a "credit monitoring service." But you can already check your credit report for free once a year from each of the big three credit reporting agencies. Just go to AnnualCreditReport.com.
Although the reports from each credit bureau are different, they'll mostly contain the same information. So check throughout the year by staggering them. You could space them out evenly at four months apart, or align them with your three-month fraud alert renewals so you remember to do both.
Guard your privacy
Many people put way too much personal information online, and criminals can often find ways to use it to their advantage (including to help "recover" your passwords). Understand the privacy settings on all your accounts, don't use the same password for everything, and don't browse sensitive sites on public Wi-Fi.
Offline, shred mail with personal identifiers, especially anything with an account number. Opt out of junk mail by going to OptOutPrescreen.com or calling (888) 567-8688 to have your name removed from direct marketing lists. That won't get rid of everything, but it will make a serious dent.
Lastly, don't give out or "confirm" personal information through unsolicited contact. Scammers pretend to be people you do business with. If you're contacted about a supposed problem with an account, independently look up contact information for that company to avoid fake email addresses and phone numbers.
Online shopping is convenient and gives a lot of independent retailers the chance to be competitive. But make sure they're taking the precautions you'd expect with your financial details. Research companies you're not familiar with, and look for the "https://" (note the s, for secure) protocol in front of a website address in your browser. It will often appear with a lock symbol next to it. If the merchant doesn't use HTTPS, see if they have a secure checkout option such as PayPal.
Along with your credit report, you should take a regular look at your bank and credit card accounts to spot any unusual transactions. It used to be that this was only possible monthly. Now the Internet and smartphones make it easy to do it as often as you want.
I do it every other day. In fact, that's how I discovered that someone in China was raiding my checking account.
More from Money Talks News and MSN Money:
- 6 steps to prevent identity theft of the dead
- What happened when my identity was stolen
- Is credit monitoring a waste?
- Why shredding documents isn't enough
- ID theft: Are we doomed?
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