Let’s get the bad news out of the way: no person, action, service, or product can prevent identity theft.
The fact of the matter is that identity thieves can and will find victims.
According to John Ulzheimer, President of Consumer Education at SmartCredit.com, protecting yourself from identity theft is like trying to outrun a mountain lion.
While you’ll never be faster than the lion, you really don’t have to be. The important thing is to be faster than the poor schmo puffing away next to you.
In the case of identity theft, that means making yourself less attractive than the next guy—because the identity thief, like the mountain lion, will always get his prey.
Ulzheimer points out that there are several ways to go about making yourself a less attractive target, and despite what many credit-monitoring service commercials might make you believe, the majority of these strategies are completely free.
“Consumers are not necessarily willing to do research on their own,” he says, “so they instead pay money for services they can get for free.”
Here are the methods you can use to protect yourself from identity theft without breaking the bank:
Security Habits at Home
The simplest way to keep your identity safe is to make security a habit. Identity theft may seem like a high-tech sort of crime, but most id thieves rely on low-tech methods like dumpster diving and mail theft in order to get your information.
- See our interview with U.S. Postal Inspector, who shares several of the more popular identity theft schemes.
Taking some simple precautions will protect you from those thieves. That means not allowing your mail to stay in the mailbox overnight, shredding personal information before recycling it, and not allowing newspapers to pile up while you’re out of town.
In particular, we all need to be more vigilant about the security of our mail in January, when we receive a great deal of what Ulzheimer describes as “high-value” mail. This is the month when we receive W-2s and other tax information in the mail, which thieves are well aware of. Just a single piece of tax-related mail can give an identity thief a treasure trove of information.
One of the best things you can do to protect yourself in the New Year is to switch to e-delivery of your tax information. Also, consider opting out of credit card offers.
Identity Protection Services
The next level of defense is employing a service that monitors your credit. Ulzheimer states that the most effective services are those that monitor all three credit bureaus: Experian, TransUnion, and Equifax.
What these services do is passively track your credit reports, and notify you via email or even text message when there is activity on your credit reports that could be indicative of fraud. This means you will also be notified when there is legitimate activity—when you actually move or apply for a credit card, for example—but these false positives tell you that the service is working.
Generally, you can expect to spend between $10 and $15 per month for a credit-monitoring service. However, as of December 13, 2012, you can monitor two of the three credit bureaus for free. Credit Sesame announced that day that it will offer free monitoring of Experian credit reports, while Credit Karma has been offering free TransUnion monitoring since 2011. Unfortunately, there is currently no free monitoring service for Equifax.
Using either a free or a fee-based credit-monitoring service will allow you to take steps quickly in the event of unauthorized use of your identity. However, Ulzheimer describes monitoring as a reactive strategy. While it can help you to contain damage, it does not prevent an attempted id theft from occurring. In order to do that, Ulzheimer recommends the proactive step of freezing your account.
Basically, credit freezing is taking your credit report almost completely out of circulation. For a small fee, you can make it impossible for anyone, including yourself, to open new credit in your name. These fees can range from $3 to $10 per credit bureau, depending upon what state you live in, meaning you will spend between $9 and $30 for a freeze with all three bureaus. These freezes last indefinitely, so there is no concern about having to remember to renew.
While freezing your credit may be inconvenient when you are looking to actually purchase a new car or home or otherwise open up credit, it is possible to “thaw” the report for that purpose and then refreeze it. The thaw costs another $3 to $10 per bureau, but for a total cost of $27 to $90 (to freeze, then thaw, then refreeze your credit), you can rest easy knowing that no one can take out credit in your name—and it’s still considerably less expensive than subscription fee-based credit monitoring services.
In addition, if you have ever been the victim of identity theft, the fee for freezing and thawing your credit report is waived.
It may seem as though a credit freeze would be a major hassle, but John Ulzheimer looks at it another way:
“Managing a freeze of your credit reports is much easier than cleaning them up after an identity theft.”
The Bottom Line on Protecting Your Identity
Identity theft is one of the bogeymen of the 21st century. And we have a good reason to be frightened of the specter of identity theft: it can cost time and money, and potentially much more.
However, fear of identity theft is no reason to feel powerless, nor is it something you have to spend a great deal of money to prevent. As long as you take intelligent precautions and make yourself look a little less like a target (or a tasty mountain lion snack), then you can feel confident that you are the only one using your credit report.