There's a pretty darn good reason every person has a lock on the front door of his or her home, and only a few have an alarm system to alert them to the entry of a burglar. Given the choice, people want to prevent a crime rather than just be notified when a crime is in progress. It makes good sense to take the simple step of locking your door and, as a backup, to monitor that same door if the lock fails.
The same exact logic applies when protecting your identity. First, you should take the steps to prevent identity theft. Then you should think about backup plans to stop a thief from causing too much damage.
Thanks to new laws that went into effect in a number of states across America, it's likely that you now have the equivalent of the door lock when it comes to protecting your identity and your personal information.
These laws, often called 'credit freeze' laws, allow you to lock your credit report at each of the three national credit bureaus: Equifax, Experian, and TransUnion. Unless you say so, no one can come in and look at your credit data. What's more, lenders use this very personal information to determine whether or not they want to give you credit. Without access to the credit report data, no bank or credit card company will open new accounts. This effectively keeps the identity thieves out.
Each year, over 3 million people in the United States have their identities stolen, according to the Federal Trade Commission. The thief applies for credit using stolen data, the bank gets credit report information about the victim, and if the thief is lucky, the credit card or loan gets issued. A frozen credit report stops this whole chain of events.
Assuming you've frozen your credit report, you'll want to unfreeze that report when you are ready to apply for credit. This is a simple process that gives banks access to your credit file for a specified number of days.
It's important to understand why this preventative step, the use of a credit freeze, is so much more powerful than the next best alternative -- credit report monitoring. Monitoring is just like that alarm system that some people have in their homes. In the case of the credit monitor, the alarm rings when changes occur in your credit report that might indicate an identity theft in progress. This might be a change in your address, the opening of a new account, or the rapid change in the balance on a credit card you rarely use.
In all of these cases, the theft is already underway. Damage will likely be done, regardless of how quickly you act. Furthermore, credit report monitoring does not report changes immediately. Would you want an alarm system that only rings when your television was stolen 45 days ago?
For these reasons -- and if you care about protecting your identity -- it's essential that you use all the preventative steps you can. Using a credit freeze is certainly one of those steps. Alternatives include: requesting a fraud flag be included on your credit report, being careful about disclosing your personal information, and shredding documents that contain confidential information.
With a little bit of extra effort, you can virtually eliminate the chances of falling victim to the most dangerous forms of identity theft. Identity theft is preventable, the same way you can take steps to prevent someone from breaking into your house. Just take the simple precaution of locking your front door!
Scott Mitic is Co-Founder of TrustedID, which offers solutions to help individuals proactively prevent identity theft. These services differ from "credit monitoring" services which only help notify individuals after they have already become the victims of identity theft. To learn more about TrustedID, visit http://www.trustedid.com.
