According to the Federal Trade Commission, just under 5% of Americans experienced some sort of identity theft within the past year. While you may have thought that number would be higher based on all the media coverage on the subject, identity theft can be costly and time consuming to fix if you are in that unlucky 5%. Fortunately, there are some relative inexpensive and painless steps you can take to protect yourself.
Generally speaking, the way identity thieves make money from your social security number and other personal information is by using that information to apply for a credit card (or other type of loan) in your name, and then using the credit card to make purchases. So, the way to stop identity theft (other than making sure your information doesn't get stolen in the first place) is to stop the thief from getting credit in your name.
Before a bank will issue you a credit card (or other type of loan -- also think cell phones), they will contact one of the three credit bureaus, TransUnion (www.tuc.com), Equifax (www.equifax.com), or Experian (www.experian.com), to see your credit report ( read more about credit bureaus and your credit report). Generally, no lender will issue you (or the identity thief posing as you) credit without first seeing your credit report.
A number of states now allow their residents to put a freeze on their accounts at the three credit bureaus so that the credit bureau will not release your credit report to a potential lender without your authorization. This effectively means that you (or the identity thief) can't get a new credit card (or other type of loan) without first authorizing the credit bureau to release your credit report to the lender. The states that currently allow for these kinds of freezes are: California, New Jersey, Louisiana, Texas, Vermont, Washington, Nevada, Connecticut, Illinois, Maine, North Carolina and Colorado (note that Texas, Vermont, Illinois and Washington limit account freezes to people who have already been victims of identity theft). There are nominal costs involved in freezing and unfreezing accounts that differ by state (some states are free, for others each credit bureau charges around $10 per account freeze and unfreeze), and each credit bureau has its own procedures. You can get more information by calling Equifax at 1-800-685-1111; Experian at 1-888-397-3742 and TransUnion at 1-888-909-8872. It's important to freeze your account at all three bureaus because many lenders will only check with one bureau before issuing credit in your name.
If you don't live in one of the states that allow you to freeze your credit bureau accounts, you can sign up for a credit fraud alert service and get e-mail notification from the bureaus immediately after a lender makes a credit inquiry on your account. Receiving timely notification of a credit inquiry should give you time to stop any unauthorized credit card or other loan from being issued. Each of the three credit bureaus offers this type of service for around $10-$15 a month; you can learn more on their websites: www.tuc.com, www.experian.com, www.equifax.com. In addition, there are third party companies that offer these types of services; check out www.trustedid.com, for example).
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