Identity theft is big business these days. Javelin Strategies, an independent research firm in the financial services and payment industry, reported that 11.1 million Americans were affected by identity theft in 2009. As more and more of our transactions take place online and we become more lax with our own privacy, it's almost expected that the number of identity theft victims will increase. Ten years ago, your bank would never E-mail you. Today you can get text messages from your bank, which lowers your guard and makes you more susceptible to attacks like E-mail phishing.
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While paying a monthly fee for an identity theft protection service may not be within your budget, nor does it necessarily prevent identity theft in the first place, there are a few steps you can take to lower your risk.
Securely Dispose of Mail
Have you ever heard of dumpster diving? Thieves love to dive into dumpsters and discover unshredded documents containing sensitive information they can use for their nefarious identity thieving deeds. That's why it's important for you to shred everything with a cross-shredder. A cross shredder chops paper and plastic into little pieces so that it would be nearly impossible for someone to put it back together. We are all usually acutely aware of how to cancel a credit card, but then we take that card and just toss in in the trash. Shred everything.
Opt Out of Junk Mail
OptOutPrescreen.com is a website setup by the credit reporting industry to let you opt-out of firm offers of credit. By signing up and opting out of this, you will not receive unsolicited offers of credit, such as new credit cards, and reduce one of the most common ways your identity could be stolen - through your mailbox. This doesn't stop your current credit card company from sending you offers, this only stops "unsolicited" offers. To stop that, call up your credit card and ask to opt out of their internal marketing campaigns. If you want to stop other forms of junk mail, this PrivacyRights.org page has a lot of great tips on how to do that.
Use a PO Box
A Post Office Box is a great way to add a layer of anonymity to your every day activities and can have the added benefit of securing your mail, if your mail isn't behind lock and key. Many people use their PO Box as their permanent address for the accounts that permit it, making it harder for an identity thief to discover your name and your actual address, since most of your documents will list your PO Box. If your mail box doesn't have a lock, you might want to get a PO Box simply because they are more secure (or buy a lockable mail box). PO Boxes vary in size, are accessible 24/7, and can be very cheap. The USPS has this page to help you find out rates in your area.
Review Your Credit Reports
Remember to review your credit reports annually. If you are the victim of identity theft, you want to detect it as early as possible so you can reduce the extent of the damage. By reviewing your reports every year, you can catch strange accounts and new addresses, signs of identity theft, as quickly as possible. It's also a good idea to review your reports for honest errors as well. Fixing them can often take several weeks, if not months, so you want to fix them as they appear.
Use Fraud Alerts
You can call up the credit bureaus and put a fraud alert on your account. Once you call one, it will notify the other two and the fraud alert will be active at those bureaus as well. The fraud alert warns a potential creditor to do additional due diligence before extending credit. The idea is that credit reports with a fraud alert have already been compromised so the creditor should do extra work to ensure they are giving credit to the right person. They aren't required to but they probably will because ultimately they lose money if they give money to a thief.
Credit Score Monitoring
I don't think credit score monitoring is necessary, certainly not one with a monthly fee, but you can use free credit score monitoring from Credit Karma as an early detection sensor for fraud. Credit Karma doesn't give you a the official FICO score -- it's a TransUnion credit score using TransUnion data -- but if you notice unexplained changes in your score it might be a sign that someone is stealing your credit. With these techniques you can do what many of the monthly identity theft monitoring and protection providers do, without the monthly fees! This also has the added benefit of reducing your junk mail, which is a boon to you and the environment, and helping you sleep better at night knowing your information isn't floating out there for someone to steal.
Jim Wang writes about personal finance at Bargaineering.com.