Identity theft comes in a variety of shapes and sizes, from someone stealing your credit card to filling out your Social Security Number on forms and applications. It's an enormous business, with thieves hitting nearly 8.6 million households in 2010, according to the Bureau of Justice Statistics. There are several companies that will happily "protect" you from identity theft for a monthly fee, but did you know that you can do much of it yourself? Like MacGyver, you can build your own identity theft shield with absolutely free tools available to anyone. All it takes is some time and some friendly reminders.
The shield is built with two sections:
1. Defend: Defending against potential attacks
2. Monitor: Monitoring your credit report for any attacks.
There are several steps you can take to defend yourself against potential identity theft. First, you want to reduce the amount of sensitive mail you receive. If your credit card company is sending you credit card applications or "convenience checks," then you risk having those pieces of mail stolen and, subsequently, used. You can cut down the amount of mail you get by signing up at OptOutPrescreen.com, a service set up by the credit bureaus to help cut down that mail.
This won't stop mailings from your credit card, so you'll have to call them up and ask to be removed from their internal marketing lists. Also, if you get paper statements from your credit card company, consider signing up for electronic statements.
If you have an unsecured mail box, that is to say that someone off the street can open your mailbox and take your mail, consider getting a post office box for your sensitive materials. A post office box is not free, but it's usually very cheap.
Finally, and this step is considered more on the extreme side, you can always request a freeze of your credit report at the credit bureau. Requesting a security freeze from Equifax, Experian, or TransUnion is fairly straightforward but it may cost you a nominal fee (the fee and the procedure varies state to state). If your credit report is frozen, you will not be able to get a credit card and most places that require a credit check will deny you, since they will not be able to get your report.
Once you've installed the defense mechanisms I mentioned above, it's time to monitor your credit to make sure it's clean. The easiest way to do that is to go to AnnualCreditReport.com or call 877-322-8228, set up by the Fair Credit Reporting Act, to get your credit report from each of the bureaus for free each year.
Next, consider signing up for Credit Karma, Credit Sesame, and Quizzle. Each one will give you a free credit score from a different bureau. It's not a FICO score—it's specific to the bureau they've partnered with. For example, Credit Karma gives you a TransUnion credit score. The value isn't in the score itself, it's the ability to check whether that score changes. If my TransUnion score from Credit Karma changes significantly this month and I haven't done anything, that's a red flag.
That's it! With those few simple steps, you're doing as much as an identity theft monitoring service does. The only thing missing is the "insurance" they provide in the event your identity is stolen, but their level of service is not much better than what you can do yourself.
Jim Wang writes about personal finance at Bargaineering.com. When he's not tackling money issues, he's usually looking forward to his next vacation and writing about it at Wanderlust Journey.