How to avoid being the victim of identity theft

According to TransUnion, one of the three primary credit reporting agencies, identity theft is the fastest growing crime in America. Each minute that goes by another 19 people fall victim to identity theft. It is estimated that the average identity theft will cost the victim about $500 and 30 hours of effort to clean up.

What is identity theft?

Identity theft most often is characterized by a criminal who obtains information about your identity (your social security number, address, phone number, bank account info, or other personal data) and then uses that information to fraudulently open new lines of credit using your identity.

The saddest part of our current identity theft crisis is most often the criminal is actually a family member, trusted friend, or co-worker. While the big data breaches like the recent Target mess often gain the most attention, more often than not the culprit is someone we know and trust.

So how do I protect myself?

Check your statements

Make it a practice to spend a few minutes reviewing your bills as they arrive, particularly credit card statements. If you see charges that you don’t recognize, or if you receive a bill from somewhere where you did not think you had an account, call and question it immediately. It only takes a minute or two to scan your statements and it could save you a great deal of grief.

Shred, shred, shred!

If you don’t own a quality shredder, you need to get one. Never put items that contain personal information in your trash without first shredding them. This includes:

  • Credit card offers
  • Bank statements
  • Old bills
  • Medical statements
  • Anything that has your social security number or other private data

Believe it or not there are thieves who will go digging through people’s trash looking for items like this that they can use to steal someone’s identity.

Use secure passwords

Generally speaking, online banking and online shopping are safe, but you do need to take  precautions. Always make sure you use good secure passwords for these sites and change those passwords from time to time. Be careful about accessing financial accounts when using a public wifi spot like a Starbucks, or if using a public computer such as your local library.

Guard your social security number

Be very careful with your social security number. Avoid giving it out unless absolutely necessary. Never include it on publicly accessible items like your driver’s license or personal checks. In fact, many states no longer even provide the option of putting your social security number on your driver’s license or state id card, and that is a good thing.

Beware of phishing

One increasingly common method of stealing someone’s identity is phishing. This is where someone sends you a very cleverly crafted e-mail that is designed to appear to come from a bank, or insurance company, government or other financial institution. Often these e-mails then indicate that there may be a problem with your account or perhaps they are offering you a valuable free service, and all you have to do is click on the link and answer a couple easy questions to verify your identity. That link will also take you to a very carefully designed site that will look very much like the real thing. The problem is neither the e-mail or the link is legitimate. Sometimes they will attempt the same thing through a phone call.

Never, ever, ever provide personal information through a link in an unsolicited e-mail or from a phone call. If you are concerned that there might be an issue with your account or think the offer of services may be legitimate, call your financial institution and inquire. Just make sure you only do this through a call that you initiate, not from an unsolicited call or e-mail you receive.

Check your credit reports regularly

You are allowed to get one free copy of your credit report from each of the three major credit reporting agencies each year by going to annualcreditreport.com. If you want to be extra diligent that means you could request a credit report every 4 months by cycling through the three agencies each year.

Check that report and make sure you do not see any unexpected or unexplained items.

Protect your computer

Make sure you are running a good anti-virus program and a good malware detection program on your PC. Check periodically to make sure that you are getting the latest virus updates in these programs. Also make sure that you regularly install any patches on your computer. Many of these patches are designed to close potential security holes. The best way to do all of this is to automate the processes. You can usually set your PC to update automatically when new patches are received and almost all good anti virus and malware programs can be set to download new configuration automatically.

Don’t carry unnecessary documents in your purse or wallet

Never carry your social security card or birth certificate with you unless you have a specific need. Don’t carry extra credit or debit cards with you. Be careful to only carry what you really need.

Opt out of credit offers

You have the ability to opt out of receiving unsolicited credit card offers by calling 1-800-5OPTOUT. My wife and I did this a few years ago and it radically cut down the amount of junk mail that we receive. Those unsolicited credit card offers are a great target for identity thieves. By opting out, you eliminate a potential target and maybe save a few trees along the way.

Freeze your credit

If you do not anticipate requesting credit in the near future, you can place a freeze on your credit reports. This prevents new lines of credit from being opened in your name. There is a small fee associated with this. Additionally, if you later need to apply for credit, you will need to contact the agencies to have the freeze lifted.

This isn’t a guarantee that no new accounts will be opened in your name. Not every financial institution is as diligent as they should be in checking your report before issuing credit. If they do check though, this would prevent anyone from opening a line of credit in your name.

Should you get identity theft insurance?

Lastly, there are many companies that now provide identity theft insurance. Some of these are legitimate and some are not.

What you don’t want to pay for is simple identity monitoring services. There are companies that will monitor your credit report and notify you of suspicious activity. There is no need to pay someone for this service. You can do it yourself for free by following the steps above.

Some companies though also provide services to clean up the mess if you are a victim of identity theft. They will assign a counselor who will work on your behalf to notify the credit issuers that your identity was stolen and to remove any charges that may have accrued as a result. This can be a very valuable service that can save you hours of hassle if your identity is stolen.

Having identity theft insurance is unfortunately a needed part of your financial plan. Just make sure you purchase insurance from a company that will help you fix the problem instead of one that just informs you that you have a problem.

No guarantees

Unfortunately, even if you follow all of these steps there is no guarantee that you might not have to deal with identity theft some day. Just remember that if you are a victim of identity theft, you should not have to pay the charges as long as you discover it quickly and report it. You will however have to take steps to clean the mess up. However, by following these steps you can greatly reduce the likelihood of being a victim.

If you would like to learn more, the Federal Trade Commission provides a great informational site on identity theft. You can find it at:

http://www.consumer.ftc.gov/topics/privacy-identity

Have you been the victim of identity theft? What steps did you have to take to clean it up?

Please note: I reserve the right to delete comments that are offensive or off-topic.