Battleing Identity Theft

Posted on November 10, 2007
Filed Under Advice, Credit Rating, Fraud | Leave a Comment

For the first time, everyone in America can now do something to prevent identity theft.

On Nov. 1, the nation’s three credit bureaus gave all U.S. consumers the ability to shut down access to their credit reports, making it almost impossible for a stranger to get the data needed to commit financial identity theft. The process is called a security freeze.

The change was not really voluntary. The credit bureaus battled with state legislators for nearly four years to avoid making the freezes available to consumers. But after 39 states passed security freeze laws of one kind or another, the industry decided earlier this year to make the option available to everyone. But there’s a catch.
Using security freezes can be costly, and they can be a hassle. But that’s just the bad news. I’ll save the good news for later.
Here’s the main “gotcha.” For most of you, it will cost $10 to establish a security freeze. And once a freeze is in place, you won’t be able to apply for new loans without “thawing” the report so a lender can assess your credit information. That costs money too — $10 each time you need a car loan or a home loan. That doesn’t sound too bad until you realize that there are three credit bureaus, and many households have two adults. That means it could cost a couple $60 each time they set up or lift a freeze.

Then there’s the hassle. Setting up a freeze requires irritating paperwork like sending certified letters. And it means keeping track of freezing and thawing. It does no good to freeze one or two reports. If you want real identity theft protection, you’ll have to freeze all three. If you want to get a new credit card, you’ll have to thaw at least one report. To buy a new house, you’ll probably have to thaw all three, then make sure they are frozen again.

Here’s the good news. All those state laws about security freezes are still in effect, and some forward-thinking legislatures imposed price caps on the process. So a freeze might be cheaper, depending on where you live. In Maryland, for example, consumers pay a maximum of $5 for freezes. In New York, the initial freeze request is free.

Advice for I.D. theft victims

There’s more good news: I.D. theft victims everywhere can now get and maintain security freezes for free — free to set, free to thaw and free to permanently remove.

The advice for I.D. theft victims is easy: Follow the links below and freeze your credit reports immediately. A security freeze is the best way to restore your peace of mind. The freeze won’t stand in your way when you need a new credit card or loan; there will just be a small speed bump. You will have to give the bureaus a password – a PIN code similar to a debit card password – to let you unlock your report so a creditor can peek at it. You might have to think a bit more before you obtain new credit, but that’s not such a bad thing.

To get a free freeze, you will need a police report or similar government document to prove you are a victim.

One note about the process of recovering from a bout with an identity imposter: The police or your financial firm might suggest that you set up a “fraud alert” or “security alert” on your account. The proper term is “fraud alert,” which is very different from a security freeze.

Fraud alerts are easy to set up (a simple phone call will do) and free. Unfortunately, they often don’t work. The alert is simply a note in your credit file that advises businesses that you might be a victim of I.D. theft. Lenders can still pull your credit report and dole out loans or credit cards in your name. Fraud alerts also expire in 90 days, unless you follow up with paperwork, so you might as well get a freeze.

Security freezes provide much stronger protection. No one can access your credit report without your permission, period.

The credit bureaus encourage consumers to get only a fraud alert because their agenda is to keep you an active participant in the credit market (i.e., they want to keep pushing credit cards at you). You are better off with a security freeze, and don’t let anyone tell you otherwise.

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