It's been a week now, and I said that I would make a decision on what I need to do with regard to protecting myself from Identity theft. The answer, as it turns out, is not to buy another service. But lets look at what I found first.
Credit monitoring
First did a search for credit monitoring services. There are a number out there, offered by the three credit bureaus as well as by third party vendors. Services run from $60-$180 a year and offer as frequent as daily monitoring of your credit report from 1 or more bureaus. While doing that search, I also came across this consumer reports article about credit monitoring. They were not kind to the credit monitors. CR brought up a few good points.
-Credit monitoring doesn't stop anything
-It could take 2 months for fraudulent transactions to appear on your credit report
-Credit monitoring won't even notice certain types of fraud, like Social Security number fraud
One thing I didn't know was that the Credit bureaus can't tie your SSN to you name. The only way for them to verify who belongs to which SSN is to ask the Social Security Administration, but the SSA won't give them that info. So instead they create fragment files for each time someone uses a new name, address, date of birth, or social security number and try to match these stub files to existing accounts. Some one who applies for credit with your SSN and their name would create such a stub, which won't be seen or affect your credit profile until it is matched at a later date. This could take years.
MIsconceptions
As for the type of credit fraud that got me thinking about ID theft protection: it would also fly under the radar because it's an existing account.The thieves stole names and credit card numbers of people with existing credit accounts.There is no way that credit monitoring services would notice anything amiss because your account isn't adding new credit, its just exercising existing credit.
The good news is that you are already protected from this type of fraud. I forgot this last week, but Credit card companies can only hold you liable for the first $50. The key here is to review you credit card statements frequently.
How to be proactive
There are a few ways you can be proactive when it comes to stopping new credit accounts from being created with out your knowing. You can place a fraud alert on your account with each of the three credit bureaus( Experian, Transunion, and Equifax). This will make anyone who wants to look at your credit report, and who isn't already authorized to do so, call you to get permission first. A lender will not be very willing to extend credit to someone if they can't look at their credit report. A fraud alert is free, and it's good for 90 days. There are actually services that will do this for you. LifeLock is one that is gaining in popularity. For $10 a month they will place a fraud alert with all 3 credit bureaus every 90 days. They will also give you your free credit reports( which you can get from annualcreditreport.com) and help you get back your identity if you are a victim of identity theft. Another similar service is LoudSiren. These are all things you can do on your own for free( except for the their insurance policy which pays for expenses related to getting your identity back) if you want to take the time and effort.
A better way to go might be to issue a credit freeze on all your accounts. Unless you have been the victim of identity theft already, this will cost you about $10 per credit bureau. A credit freeze stops anyone but existing creditors from looking at your account, and its good for 7 YEARS or longer. You must lift the freeze if you are going to apply for a loan, new credit, or some other things like new utility service or cell phone service. It's $10 to lift the freeze and then another 10 to reinstate it. Still, that means you would pay about $30 to set it up, and if you only apply for credit once a year it could be as little at $20 to maintain it while still having access to "new money". Considering you would pay $90-$110 annually for the same service from the above companies, that is quite a savings.
Another thing you can do is opt out of receiving junk mail credit offers. I did this quite successfully a few years ago. Since I was moving around quite a bit, I had all my mail sent to my parents house. The bulk of the mail that was received by my parents for me was credit offers. So to prevent them form storing boxes of junk mail offers for me, I called up the number on the credit offer and requested they no longer send me those offers! After about 3 months the stream of offers i received became a trickle and then practically non-existent.
What am I going to do?
The credit freeze options sounds like a good idea. The only problem is that since I have engaged in a credit card arbitrage plan, it would make applying for new credit next year difficult. That combined with the fact that I don't know where I'll even be living next year, makes this a tricky proposition. I don't want to be caught paying interest on $15,000. So here is the plan for me:
-Continue to monitor my credit card usage monthly
-Continue to get my free credit reports from annualcreditreport.com
-Place a fraud alert at all three credit bureaus. I'll let it expire and then apply for my next round of credit to further the arbitrage scheme. After that I may place a freeze.
-Use the junk mail opt out clause to reduce the number of credit offers I get. Since I've applied for credit at my current address, that put my name and new address back in the list and the number of credit offers I've recieved has been increasing. I've let this slide since I'm wait to see if something really good comes in, but now I think the risk out weighs the reward.
Anyone else have any good proactive measures to take to prevent credit fraud?
(image by fpsurgeon via flickr)
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