Identity Theft and Credit Monitoring | Moneta

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How can someone steal your identity?  All that is needed is your social security number, birth date, and address.  With this information, criminals can apply for credit and begin running up debts—in your name.

According to information compiled by Javelin Strategy &Research, identity theft affected nearly 10 million American adults in 2009, causing anguish, financial loss, and a general distrust of those around us. Adding insult to injury, a large percentage of these thefts are perpetrated by someone close to us, like a family member or coworker. Some recent victims included a group of restaurant employees in southwestern Illinois whose identities were compromised by their manager. This person was able to use the identities of 11 people who either worked at the restaurant or applied to work there. Their personal information was ultimately used to set up bank accounts and apply for loans.

Other forms of identity theft are more sophisticated, such as one involving an illegal immigrant and U.S. citizen who targeted homeowners and people with large credit lines.  In this scheme, the men stole money and transferred it overseas. In order to accomplish their crime, they gathered data from public records, associates accounts overseas, and unwitting bank employees. The suspects then circumvented the bank’s attempts to verify certain transfers by re-routing telephone calls to their cell phones.

It is important to be vigilant in monitoring your credit reports and to take proactive steps to ensure you are not the next victim.  Consider the following types of fraud and what can be done to help prevent becoming a victim.

Dumpster Diving: Criminals steal mail or discarded items, including confidential information, utility bills, account statements, and credit card solicitations. To avoid being victimized in this way, shred all mailreceive account statements onlinesign up for online bankingopt-out of some unwanted credit cards solicitations at www.optoutprescreen.com

Skimming:  Here, criminals steal credit/debit card numbers by using a special storage device when processing your card. To avoid this, keep credit cards in sight if possible (this happens a lot at restaurants), and keep credit card receipts and compare them to your monthly account statements.

Phishing: Perpetrators pretend to be your bank or financial institution and contact you via email asking you to verify personal information.  Never answer an email from your bank that asks you to provide personal information.  Always call the bank to verify the validity of this kind of communication.

Another way to prevent identity theft is to sign up for a credit monitoring service. In this nearly $1 billion dollar (and growing) industry there are many players.  Some of the larger players are the credit agencies, freecreditreport.com, lifelock.com, and identityguard.com.  It is important to understand what various companies provide and protect.  Reading the fine print will help you understand the terms and conditions.

If you elect a monitoring service, you probably want them to check all three credit reports (some only check one) and provide ID Theft insurance. Unfortunately, the theft insurance policies generally do not cover such financial losses as fraudulent charges, over-limit or insufficient funds fees.  Insurers expect banks or credit card companies to erase these expenses. Therefore, it is important to understand what the policy will cover, how and when.  Often, the insurance doesn’t pay if the crime was committed by a family member. Also, you might want to check with your homeowner’s or renters insurance, since you may already have an identity theft endorsement.

Some critics of monitoring services say that for the vast majority of consumers—those whose credit status doesn’t change quickly or drastically—such a service is a waste of money.  Many of these services are feeding off paranoia, often misleading consumers who may have been seeking a free credit report but end up paying for a subscription service on a Web site that uses a very similar name: freecreditreport.com.

You may have seen or heard advertisements for this website. It shows a group of young “20-somethings” working at a restaurant, playing guitars and singing a jingle about how their credit was compromised and stolen. If particular monitoring service does not interest you but want to be proactive in your own credit monitoring, you can obtain a free credit report annually from each of the three credit bureaus through annualcreditreport.com or by calling them at 1-877-322-8228.  .

If you suspect you are the victim of identity theft or there is inaccurate information circulating about you, it is very important that you contact the three credit reporting agencies (Experian, Trans Union, and Equifax) by phone and letter. You should also attach a fraud alert to your credit profile or ask them to correct the inaccurate information.  By law, they must investigate within 30 days.  If fraud has occurred, insist the police take an Identity Theft Report, which entitles you to certain legal rights.  It is generally not recommended that you change social security number or cancel your credit cards if you become a victim. These actions tend to raise more red flags and damage your credit score.

Finally, if you don’t want to be bothered with any of this, are retired and think you have no need for future credit, you can utilize a credit freeze.  For a small charge, the bureaus will seal your credit information until you tell them otherwise.  This will prohibit them from issuing your credit report to anyone. However, be aware that this action can be a hassle if there is more than an occasional need to access your credit reports.

For a comparison of the various monitoring services including costs, visit http://www.consumercompare.org/identity_theft_protection_services/compare.php

This company, Next Advisor, bills itself as “The trusted, independent source for comparing the most valuable new services.” This list is very comprehensive and may assist you as you consider your options.

Curtis, David_cropped

David Curtis, CFP®

David is the professional consultant for Allan Curtis.