I have never been hit by identity theft (here I pause to knock on wood). But I always worry about it, knowing the total mess it makes of your financial life. The agony can last for years, while you try to reestablish your reputation as an honest person.
So last year I froze my credit accounts at the three major credit bureaus. That’s not perfect protection against fraud, but I’m sleeping better.
A “security freeze” stops a lender from viewing your credit history. As a result, a thief with your Social Security number and other data can’t get a credit card issued in your name at a different address. Nor can he or she order cell phone service on your account, or get other loans.
The freeze applies to you, as well. You can’t get new credit yourself unless you temporarily de-ice your accounts. I ran into this issue recently, when I tried to change the name on the American Express card I use for business expenses, and was refused. I’d completely forgotten that I had blocked access to my credit history.
It was an easy fix. I went online with the credit bureau Amex used, entered my personal information and PIN, paid a $5 fee, and unblocked my account for 24 hours (you can unblock for longer periods if you want). Amex checked my payment history, OK’d the card right away, and the freeze went back on.
There are certain situations where you wouldn’t want to freeze access to your credit history. For example, say that you’re setting up house in a new area. Banks, landlords, phone services, auto insurance companies, perhaps even employers will want to know if you’re keeping your finances in good order. You’ll go through lots of credit checks. But once that’s over, however, think about a freeze.
What about taking advantage of those “instant credit” offers at stores? You might get 10 percent off your day’s purchases if you accept a store credit card on the spot – tempting, if you’re doing a lot of holiday shopping in the same place. A security freeze prevents you from doing this. You might be able to get the freeze lifted by phone if you know your PIN. (From another point of view, it’s best not to accumulate too many cards.)
To freeze your accounts, you have to contact the three major credit bureaus individually. I did it online, and it took about 20 minutes for each bureau. Here are the instructions for Equifax, Experian and TransUnion. Fees vary, depending on your state; they run from zero to $20. Freezes are free if you’ve already been a victim of identity theft (to prove it, you’ll have to provide a copy of the formal complaint you made to the local police.). If you live in a community property state, both spouses have to freeze their accounts at the same time.
Be sure to keep the PIN number associated with the freeze. You’ll need it when you want to lift the freeze temporarily—for example, when you apply for new credit or, perhaps, a job. There’s usually a small fee for lifting the freeze, again depending on your state.
If an ID fraudster has hit you already, call the store and cancel the card. Then go online to the credit bureaus and ask for a free, 90-day fraud alert. One call supposedly covers all three bureaus, but it’s best to contact each of them separately. With a fraud alert, a bureau is supposed to call you if someone applies for new credit on your account, to see if it’s OK. But notifications can slip through the cracks, if you’re not available immediately.
You can extend the fraud alert for up to seven years, if you can provide proof of identity theft (again, that police report). But why would you bother, when you have the far-more-secure option of the credit freeze?
Credit bureaus, banks and other private companies also offer credit-monitoring services, which for some reason sell like hotcakes. They report new accounts opened in your name and any changes made to your personal information, such as a new address. But if any of this is ID theft, you learn about it after the fact – maybe many weeks later. By that time the crook has come, wrecked your credit history, and gone. For this dubious service, you pay between $120 and $180 a year.
The best and cheapest way to protect yourself is with a credit freeze. That, plus checking your credit report regularly, to look for unauthorized accounts. You’re entitled to free copies of your credit reports once a year, from the website, free annual credit report.