A key component of any financial plan includes securing and protecting your credit scores by minimizing the threat of identity theft. It can often take dozens or hundreds of hours to clean up your credit after your identity has been stolen. However, the real financial threat is much greater. Take an example of a mortgage re-finance. Let's say your credit has been badly damaged by identity theft and during the process of cleaning up the mess, mortgage rates move to historic lows (much like we've seen during the first quarter of 2010). However, you can't re-finance to the lower rate because of your damaged credit. In this scenario you could lose tens of thousands of dollars in the missed opportunity to lower your mortgage rate.
The vast majority of identity theft still happens the old fashioned way:
- People You Know
- Theft of a Wallet or Purse
- Mail Theft and Dumpster Divers
People You Know
Unfortunately, victims of identity theft are most likely to have their identity stolen by somebody that they know. Roommates are the most common culprits. Roommates often will not have a personal connection to you and will not have any compunction about stealing your identity. While they live with you they have access to your mail, will learn where you keep personal documents, and may even have access to a wallet or purse you might accidentally leave out.
However, even homeowners are not immune to identity theft from people they know, including children, grandchildren, and friends of children and grandchildren. These family members do not start off intending to hurt you, but if they get into drugs, start hanging out with bad friends, or get into other trouble they often times will try to get money the easiest possible way; from you.
Keep Your Info Private
Whether you live with roommates, or if you have teenage or adult children or grandchildren staying with you, invest in a locking file cabinet and a safe. Even if you trust your children or grandchildren, you can't always trust their friends. Any documents that have your Social Security number on them should go in your safe. Other critical papers like passports and birth certificates should also go in the safe. Use the safe to store credit cards you don't often use. Finally, if you have written down any pin numbers or passwords, these should go in your safe. Documents with account numbers (bank statements and brokerage statements) can go into your locking file cabinet. Account numbers by themselves are not enough to steal you identity so these documents can have a slightly lower level of protection.
Theft of a Wallet or Purse
This is harder to control since most often these types of thefts happen when you inadvertently leave your purse somewhere, or when a professional criminal lifts the contents out of your purse or lifts your wallet in a crowded area. The main vulnerability in these situations is that the criminal has your ID and most likely your credit cards. Precious hours can pass before you realize that your purse or wallet is missing. During these times, sophisticated criminals will have already stolen hundreds or thousands of dollars on your credit cards. The long term vulnerability is the possibility that the criminal will use your ID and credit cards to apply for other credit cards. However, this will be difficult if they don't have your Social Security number (however, they will have your date of birth from your ID).
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Simple to Ways to Protect Yourself
- Never carry your Social Security card in your wallet or purse. Always leave it at home in your safe.
- Make sure your Social Security number is not on your driver's license or other ID.
- Also, never carry more than one or two credit cards with you. If you have more than two credit cards, leave the rest at home in your safe. That way, if your wallet or purse is stolen, when you call and cancel the stolen credit cards you still have other credit cards in your safe that you can use.
- Once you realize your wallet has been stolen, immediately call and cancel the stolen credit cards.
- Next, call the police and file a report. Do this before you even get home if you can. As soon as you get home, notify the three credit bureaus (Equifax, Experian, and Transunion) that your wallet has been stolen and give them the information from the police report. This will enable them to add a 90 day freeze to your credit. You can extend this freeze later, but the main thing is you want to do is contain any damage that may happen on the day of the theft.
Mail Theft and Dumpster Divers
Many homeowners have a standard unlocked style mailbox in front of their home. These mailboxes make it easy for criminals to steal your mail. The main things criminals are looking for are boxes of checks being mailed to you from your bank, prescription medications, and credit cards mailed to you. Checks are the biggest vulnerability since criminals can start using these right away. Criminals who steal mail usually have the ability to make a passable fake ID to use when they try to use your checks.
Less common are criminals who go through your trash to find valuable information since going through your trash is pretty distasteful, even for identity criminals. Most criminals will only go through your trash if they already have other information about you.
Protection From Identity Theft
If you currently have an unlocked mailbox in front of your home, replace it with a locking mailbox. It is best to look for a mailbox with a capacity to take small packages like boxes of checks and prescription medication. Next, invest in a heavy duty cross-cut type shredder. I recommend shredding any credit card offers you get in the mail before throwing them in the trash. Basically, anything you get in the mail that has a form you can fill out to apply for something, shred it before throwing it away.
Check your credit regularly
Federal law requires that the three credit bureaus provide you one free credit report every year. The website the credit bureaus have created to meet the requirements of the law is www.annualcreditreport.com. I recommend checking your credit there each year. There are lots of advertisements for companies supposedly offering free credit reports but most of these are misleading and require you to sign up for some service before they give you your credit report. Stay away from these offers and keep with the government required service at www.annualcreditreport.com
I also recommend signing up for a credit monitoring service. These services charge every month (usually between $10 and $15 per month). Sign up for these services directly with one of the credit bureaus. Credit monitoring services will notify you by e-mail whenever somebody has made a credit inquiry, or whenever a new account is opened. Also, they will e-mail you every month with a status report, even if there has been no activity.
Taking these simple steps will help safeguard your good name and will protect the things you have worked so hard for! Make sure to protect my ID.
Matt Prestwich is a freelance writer and an expert on identity theft. You can find more of Matt's writing on his Fightclub Blog. Matt is not endorsed or affiliated with LPL Financial.