How to Protect Yourself from Identity Theft with DIY Credit Monitoring

Identity theft has become one of our biggest fears. The question is how to best protect yourself from such a terrible crime. There are companies who, for a service fee, will take steps to reduce your risk of identity theft. Many of these companies will repay your losses and help you clear your names if their identities are stolen.

However, many argue that such identity theft protection services are unnecessary and cause people to spend hard-earned cash needlessly. For example, many ID protection "services" like fraud alert, free credit report, removal from prescreened credit card offers and junk mail lists, are acrually available to you for free with a bit of research.

What some companies do provide is some handholding through the process once you've become a victim, offering at least a sense of peace of mind. In addition, some companies offer a guaranteed reimbursement if your information is compromised.

For example, a company called Identity Theft 911 provides newsletters, white papers, articles, daily alerts and identity theft literature. Site members can log into their account or call the provided 800 number and communicate any compromises, such as a stolen wallet, credit card or Social Security number.

If you do get compromised, they write all the letters, do conference calls with creditors, credit reporting agencies and government agencies.

Intelius is another company which monitors credit reports and also monitors where your personal information is being used and alerts you on any suspicious activity. The initial stages of identity theft don't show up in credit reports and may be undetectable through fraud alerts or credit monitoring. But suspicious activity often does appear in public records.

LifeLock is another ID theft protection company which received a lot of publicity because the company's CEO publicly revealed his Social Security number in ads for his service. LifeLock works to make sure blemishes never appear on your credit report or public records. The company repays losses, cancels charges and works on behalf of the victim to clean the situation up, he says. If you are ever put in jail because somebody committed a crime posing as them, the company bails you out and hires a lawyer.

For $10 a month, LifeLock will set up fraud alerts with all three credit bureaus. These require creditors to verify identity before opening new lines of credit. LifeLock will restrict junk mail, such as preapproved credit offers. Perhaps the biggest selling point for LifeLock is its $1 million service guarantee. Davis says 22 people have enacted the guarantee, and all received payment. He did not say how much the recipients received.

However, the system does not always work. The CEO's marketing tactic to reveal his Social Security number actually resulted in his identity being compromised when someone cashed a false check under his name.

You should beware of the $1 million service guarantees. In many cases, the guarantee covers only losses if the company didn't do something it said it would. If it happened due to circumstances that wouldn't normally actually prevent ID theft - the service guarantee is inapplicable.

Some customers have not been happy with LifeLock - consumers in three states -- Maryland, New Jersey and West Virginia -- filed lawsuits against the company, claiming that Lifelock used misleading advertising and claims to drum up their business.

Do-it-yourself (DIY) protection

Many of us do our own taxes and change our own oil. So there's no reason to think we can't protect our own identities. I believe that do-it-yourself protection is the best way to protect yourself from ID theft.

Write the three credit bureaus to request a free copy of his or her credit report or to activate fraud alerts. A fraud alert is a notation on your credit report that asks the credit issuer to take additional verification steps before granting credit. It generally expires after 90 days. A credit or security freeze blocks new lenders from accessing your credit file without your permission.

Freeze your credit at Equifax, Experian or TransUnion. If you freeze your credit and then a few weeks later get the itch to buy something, you can lift the freeze and specify for how long. Freezing and unfreezing usually involve a transaction fee of around $10 - but compared to the monthly fees charged by many protection services, this is the cheaper way to go.

The best protection, though, is to be careful at all times when sharing your personl information. You should treat any mail carefully, be on guard when using the Internet, select intricate passwords and verify a source before sharing information.

Most importantly, you should be careful when giving out your social security number. Ask these questions before giving out your digits

•     Why do you need my SSN?

•     How will it be used?

•     How do you protect it from being stolen?

•     What will happen if I don't give you my SSN?

If you don't provide your SSN, some businesses may not provide the services or benefits. But getting answers may help you decide whether you want to do business with them anyway.

Read my other article on when to give out your social security number:


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