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Summer 2008 
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Identity Theft: The Best Defense is a Great Offense
By The Tarbox Group - July 2008
There were 8.1 million U.S. residents who were victims of identity theft in 2007. (Identity theft is the taking of someone else's personal information and using it for an unlawful purpose, according to the California Penal Code.) That represents 3.6% of adults, including more than a million Californians. The total cost of identity theft in 2007 was $45 billion.
According to the Federal Trade Commission's 2007 report on identity theft, 59% of identity theft involves existing credit card accounts. Forty-nine percent involves other existing accounts, such as bank accounts and utilities. And 22% involves new accounts and other non-account-related forms of the crime. (Note: the numbers add up to more than 100% because some cases involve more than one form of identity theft.) It is the third type, new account and non-account identity theft, that can be the most difficult to resolve. Victims of this kind of identity theft may spend hundreds of hours and thousands of dollars clearing up their records and their lives.
What can you do to avoid becoming a victim yourself?
I. Simple Steps
There are a few simple steps you can take to prevent becoming a victim of identity theft.
- Avoid throwing anything in the trash that you wouldn't feel comfortable handing to a thief. So, buy a crosscut or confetti shredder and shred any personal information before it heads to recycling or the landfill.
- Carry as little personal information in your purse or wallet (or even your phone/PDA) as you need on a daily basis, in case that information is lost or stolen.
- Avoid receiving credit card offers in the mail by “opting out”. If you decide you don’t want to receive pre-screened offers of credit and insurance, you can opt out for five years or permanently by calling toll-free 1-888-5-OPTOUT (1-888-567-8688) or by visiting www.optoutprescreen.com.
- Go paperless. Receive and pay your bills online. Despite the common fear that hackers are the most likely way you’ll release your personal information, it is far more likely that your information will be compromised in more conventional ways (stealing your mail, raiding your trash, etc…).
Beyond these simple steps, you can make more concerted efforts to prevent yourself from becoming a victim and you can be alert to the signs that you may have unknowingly become one. You will find a number of do-it-yourself tricks below. For those of you who wish to hire someone to do it for you, there are references and issues to think about outlined below.
II. Credit Monitoring – Do It Yourself
Credit Reports
A credit report details an individual's credit history. This history includes personal identification information, a listing of credit accounts and loans, payment records on those accounts (particularly late payments), defaults, charge-offs, repossessions, bankruptcies, and recent inquiries from third parties (such as potential lenders or insurers) about the credit report. Credit reports are compiled by specialized data aggregation companies called Credit Reporting Agencies (CRAs) or credit bureaus. The big three CRAs in the United States are Equifax, Experian, and TransUnion. Other smaller or more specialized CRAs typically need not concern an individual consumer.
The accuracy of your credit report is important because your credit history affects so many areas of your life. Planning to buy an auto or boat? How about a mortgage to buy your own home? Or maybe you just want to open a charge account or get a credit card. Lenders use your credit history to determine whether to give you the loan or account and what your interest rate will be. Potential employers often check credit reports before offering you a job and landlords before renting you an apartment. Most insurance companies now use an insurance score based on your credit history to help determine the rate you'll pay for auto insurance, and some use it for homeowners insurance.
An amendment to the federal Fair Credit Reporting Act requires each of the major credit bureaus to provide you with a free copy of your credit report, at your request, once every 12 months. Additionally, under federal law, you're also entitled to a free report if a company takes adverse action against you, such as denying your application for credit, insurance or employment, and you request your report within 60 days of receiving notice of the action.
If you are a resident of California, you have a few expanded rights with regard to your credit report. For example, if you have been the victim of identity theft, you can file a police report stating such. Then, you are entitled to receive up to 12 free credit reports, one per month, in the twelve months from the date of the police report. Additionally, there are certain credit monitoring services offered to victims of identity theft (please see the reference below to the Debix Identity Protection Network).
To order your free annual report from one or all the national consumer reporting companies, visit www.annualcreditreport.com, call toll-free 877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can print the form from www.ftc.gov/credit. Do not contact the three nationwide consumer reporting companies individually; they provide free annual credit reports only via the avenues listed above.
You might request a copy of your credit report once every four months, from a different credit bureau each time, if you wish to monitor your credit reports free of charge. This rolling timeline takes advantage of the law requiring a free annual credit report from each of the three largest bureaus. If you wish to purchase a copy of your report, you’ll need to contact each CRA directly. The contact information for each follows:
Equifax: 800-685-1111; www.equifax.com
Experian: 888-EXPERIAN (888-397-3742); www.experian.com
TransUnion: 800-916-8800; www.transunion.com
Fraud Alerts
A fraud alert is a special message on your credit report that a credit issuer receives when checking a consumer’s credit rating. It tells the credit issuer that there may be fraud involved in the account. When one tries to open up a credit account by getting a new credit card, car loan, cell phone, etc., the lender should contact you by phone to verify that you really want to open a new account. If you aren't reachable by phone, the credit account shouldn't be opened.
Note, however, that a creditor isn't required by law to contact you, even if you have a fraud alert in place. So, fraud alerts are not fail safe. Also note that placing a fraud alert in your file may delay your own ability to obtain credit. (Perhaps that isn’t always a drawback!)
You may place a fraud alert in your file by calling the fraud department of just one of the three nationwide consumer credit reporting companies. Often there is an automated voice response system which allows you to place the alert, so the process should not take long. As soon as that agency processes your fraud alert, it is supposed to notify the other two, which then also must place fraud alerts in your file. However, the companies are not required to do so, so it would be prudent to contact each of the companies individually.
Within 24 hours, an alert should be activated at the credit bureau. You should receive a confirmation in the mail a week or two after your call. If you don't receive this confirmation, call and place the alert again.
An initial fraud alert stays in your file for at least 90 days, at which time it may be re-extended at your request. An extended alert stays in your file for seven years. If you ask for an extended alert, you will have to provide an identity theft report. An identity theft report includes a copy of a report you have filed with a federal, state, or local law enforcement agency. For more detailed information about the identity theft report, visit www.consumer.gov/idtheft.
Credit Freezes
There is an alternative mechanism that may provide better protection than a fraud alert – a credit freeze. A credit freeze allows you to restrict access to your credit report. If you place a freeze on your report, potential creditors and certain other people or businesses can’t get access to it unless you lift the freeze temporarily or permanently. For more information about credit freezes, check with your state attorney general’s office or visit www.naag.org.
Limiting access to your credit report makes it more difficult for identity thieves to open new accounts in your name. That’s because most creditors will need to view a credit file before opening a new account if they can’t see the file, they may not extend the credit. Still, a credit freeze may not prevent the misuse of your existing accounts or certain other types of identity theft.
A credit freeze is different from a fraud alert in a number of ways. A freeze generally stops all access to your credit report, while a fraud alert permits creditors to get your report as long as they take steps to verify your identity. The availability of a credit freeze depends on state law or a consumer reporting company’s policies; fraud alerts are federal rights intended for consumers who believe they may have been, or actually have been, victims of identity theft. And some states charge a fee for placing or removing a freeze, although it is free to place or remove a fraud alert.
If you live in California, you have the right to put a security freeze on your credit file. A security freeze is free to identity theft victims who have a police report of identity theft. If you are not an identity theft victim, it will cost you $10 to place a freeze with each of the three credit bureaus. That’s a total of $30 to freeze your files.
To place a freeze, contact each of the nationwide consumer reporting companies because a credit freeze placed at one company is not referred to the other companies. You can find sample letters on the website of the California Office of Information Security & Privacy Protection at www.oispp.ca.gov. If you live in California and have been an identity theft victim, provide a copy of your police report (or DMV investigative report) of identity theft so that your freeze can be placed for no charge. Note that if you are married, you may wish to freeze your spouse’s files, too. In that case, you would need to send separate letters requesting the freeze, in order to get the benefit. So the total cost for freezing is $10 x 3 credit bureaus x 2 people = $60.
Credit bureaus must place the freeze no later than five business days after receiving your written request. Credit bureaus must lift a freeze no later than three business days after receiving your request.
Placing a credit freeze does not affect your credit score, keep you from getting your free annual credit report, or keep you from buying your credit report or score. It doesn’t prevent you from opening a new account yourself, applying for a job, renting an apartment, or buying insurance, either. In these situations, the business usually needs to review your credit report, but you can ask the consumer reporting company to lift your credit freeze temporarily, or remove it altogether. In California, the fee for lifting the freeze temporarily is $10 for a date-range lift and $12 for a lift for a specific creditor. Again, these fees are levied by each of the three consumer credit reporting agencies.
III. Credit Monitoring – Paying Someone Else to Do It For You
There are many steps you can take to protect yourself, some more time consuming than others. And, yet, some people want some form of protection without the investment of their personal time. For those people, hiring a professional to monitor their credit may be the appropriate step to take. (Note the distinction in language in this case: monitoring your credit report is not a deterrent to identity theft, but simply a potential early warning.)
There are credit monitoring companies whose services include “privacy protection” or “anti-ID-theft” services. Many companies may offer additional services, including removing your name from mailing lists or pre-screened offers of credit or insurance, representing your legal interests, “guaranteeing” reimbursement in the event you experience a loss due to identity theft, or helping you track down whether your personal information has been exposed online. A variety of credit monitoring companies offer these services. We found a helpful comparison of services on www.nextadvisor.com in the identity theft section.
The actual services provided for the subscription price vary widely among different companies. In general, the services promise to check your credit report regularly for suspicious activity and alert you. This checking ranges from daily to quarterly. They also provide you copies of your credit report and credit score (though not necessarily your FICO credit score) again at stated intervals. You may be able to view your report online anytime, but again the services typically update the report only at stated intervals, which can be lengthy. Typically, the more frequent or more detailed the report, the more expensive the service. Note that you are buying knowledge, not safety. These services do not assist in the prevention of identity theft, but, instead, help you minimize the losses that may be associated with the theft.
Some companies allow you to “lock,” “flag,” or “freeze” your credit reports. Often, the companies advertising these services simply are offering to place a fraud alert or credit freeze on your report. These services also may renew or update your alerts or freezes automatically, as long as you continue to pay. But, remember, under the law, fraud alerts and renewals are available for free if you have reason to believe you have been — or are about to be — a victim of identity theft.
Some offer "fraud resolution" services and fraud insurance, though just what those include varies. Identity theft insurance doesn't reimburse you for money that is stolen from you. Some policies pay expenses such as lost wages (often capped at $2,000) and legal fees, but a lawyer is usually not required to resolve an identity theft case. The main requirement is your time in dealing with creditors to provide documentation and work out the issues. Even though some plans claim to cover the costs associated with resolving an identity theft case, the burden of dealing with creditors will still fall on you because most creditors won't deal with anybody else. Note that some homeowners’ insurance policies cover these costs so check your policy benefits first.
The potential benefits of credit monitoring services include the following:
- Early detection of errors or suspicious activity. Choosing a service which monitors your credit report daily or even weekly (provided the report is also updated that regularly) and sends you regular alerts or "all clears", can help you spot problems early.
- Fraud resolution services. Some services promise help with cleaning up your report when you've been hit by identity theft.
- Identity theft insurance. Identity theft insurance covers the time and money you spend restoring your identity and repairing credit reports if your identity is stolen. Covered items may include attorney fees, mailing costs, reapplication fees, phone charges, and lost wages for time taken off from work to deal with identity recovery. The deductible should be fairly low, perhaps $100 or so. Should you not use a credit monitoring service, you can purchase stand-alone identity theft insurance from various vendors for $25 - $50 annually.
The typical limitations of credit monitoring services include:
- Most services monitor only one CRA's report. Although most services advertise their product by saying they provide access to all three reports, most generally provide this only to start; the regular monitoring covers just one agency's report. Information and errors in reports of the three CRAs can differ.
- The monitoring and updating may not be timely. The “gold standard” for monitoring services would be daily monitoring of all three reports with email alerts within 24 hours. Many services have much wider intervals. Although you may see your credit report online anytime, many services only update these quarterly; some of the less reputable services may update even less frequently.
- Cost. The monitoring services we looked at charge between $40 and $150.
- User complacence. Subscribers to a credit monitoring service shouldn't buy, and then forget to review, their credit report. Regular personal review is still a must because only you know what's accurate. Likewise, only you can take steps to correct errors or control the damage if you've been a victim of identity theft.
The Federal Trade Commission (FTC), the nation’s consumer protection agency, says before you pay for an identity theft prevention product or service, make sure you understand exactly what you’re paying for. Many people find value and convenience in paying an outside party to help them exercise their rights and protect their information. At the same time, some rights and protections you have under federal or state laws can help you protect your identity and recover from identity theft at no cost. Knowing and understanding your rights can help you determine whether — or which — commercial products or services may be appropriate for you.
The people who would most likely benefit from these services are those individuals who have already been the victim of serious identity theft or those who are at high risk of becoming a victim.
Interested in a few specific companies and what they offer.; One of the most well-known is a company called LifeLock (whose CEO readily advertises his personal social security number). For $99 per year, you pay for services which you could acquire for no cost. The company sets fraud alerts on your accounts with each of the three credit bureaus and renews them when they expire. Additionally, you receive a copy of your credit report (from each of the three bureaus) once a year. The company has recently added two features that seem interesting. The first, eRecon, monitors the Internet’s black markets for any use of your personal numbers such as credit card and social security numbers. The second, TrueAddress, notifies you if your address has been changed in any national databases, a common tactic of identity thieves.
You might also consider Identity Guard’s Total Protection package. As part of the service you can download an Internet security software that includes anti-virus, firewall, anti-phising and anti-spam software. The company monitors your file at all three credit bureaus, monitors public records for any changes, offers lost wallet projections, sends you each of your credit reports every quarter and will alert you by e-mail if anything changes. One other tool. The credit analyzer. Apparently, this tool allows you to play around with different scenarios to see how different approaches might affect your credit score (e.g. what would happen if you paid off a credit card or opened a new loan). All of this comes at a price of $14.99 per month (with a 30-day free trial).
One of the services that intrigues us the most is the Debix Identity Protection Network. Debix inserts itself directly into the credit acquisition and checking process. So, say a thief applies for credit in your name. Since Debix is listed in your credit reports at each of the three bureaus, the creditor calls the nationwide Debix hotline and you are contacted immediately (according to the Debix website). So, you are able to stem the fraud before it happens. If for some reason the creditor opts to not call Debix, Debix offers insurance and recovery services to cover any costs incurred. Typically, Debix charges $149 per year for these services.
However, if you have been a victim of financial identity theft, you may be eligible for a Debix program that allows you to use Debix services at no charge for the first 12 months after enrollment. If you are interested, you can read more about the program at www.debix.com/itrc.
Conclusion
Given the prevalence of all types of identity theft in this country, you are better off paying some attention to the issue rather than ignoring it. We hope the road map provided by this article will help your efforts.