How to Prevent Identity Theft: Part 2

Most consumers -- 89 percent of us -- want identity protection, according to a 2007 study by consumer advocacy giant, Consumers Reports. In last week's column (How to Prevent Identity Theft: Part 1), we explored day-to-day actions you can take to stop more than 60 percent of identity fraud.

But the most heinous identity crimes don't occur when someone steals your checkbook or credit card (this usually doesn't harm your credit ratings when the theft is reported to the police and filed with the credit bureaus). Instead, the serious damage occurs when they steal your entire credit history. With access to your intimate, personal credit files, these thieves can build a bogus life -- assume your identity to purchase homes, cars, jewelry, RVs, etc. To put it even more bluntly, they can:

• Cost you thousands of dollars
• Destroy your credit
• Wreak havoc in your life.

But the good news is you can protect your identity by placing a security freeze on your credit files with each of the three credit reporting agencies -- Equifax, Experian, and TransUnion. To place a freeze, you will fill out a brief form supplied by each of the credit bureaus and mail your requests by certified mail along with copies of identification and proof of address. You will receive notification by mail that the freeze has been placed along with information telling you how to lift or cancel it.

After you place a security freeze, or file freeze as it is sometimes called, no one can access your credit files except current creditors or collection agencies working on their behalf. Unless you remove it, the freeze will remain for seven years. This means you control who sees your credit files and identity thieves are forced to find a different victim. It also means employers, potential landlords, or others who may need to review your credit cannot see your file unless you temporarily lift the freeze.

In 2003, California authorized these security freezes and they gradually have been adopted by most other states. This month TransUnion credit reporting agency launched its Security Freeze program in all 50 states. Experian says it will launch its service on November 1, and Equifax says it will institute its own program by the end of this month. Watch for further details in future columns.

Each of the credit bureaus will charge a fee. TransUnion and Experian will charge $10 in most states. And they will also charge a small fee to temporarily lift a freeze for up to 30 days when you need to have your credit checked. If you have experienced identity fraud, no fees will be charged.

Experian says its system will supply you with a PIN number, which you must have to access your credit records. You will be able to phone an 800 number and get your Experian File Freeze lifted within minutes. In an emergency, you can easily lift the Experian File Freeze as long as you have your PIN.

TransUnion will require you to have both a FIN (file identification number) and PIN to access your credit file or lift the freeze. As with Experian, you absolutely cannot lift the freeze without these numbers. If you lose them, you will need to wait approximately two weeks to receive replacements.

Warning: When you sign up for a freeze service, these agencies will all try to sell you credit monitoring or copies of your credit reports or your credit scores. Don't buy. No one can access your credit after the freeze is in place unless you authorize access. You don’t need your credit monitored.

The only product worth purchasing from the credit bureaus is the FICO score that Equifax offers when you order your annual free credit report through Annualcreditreport.com, as we discussed in a previous column (). With a security freeze in place, you will still be able to order your annual free credit reports and correct any credit report errors without lifting the freeze.

Finally, be sure to look closely at all accounts in your credit report, even those in good standing. If you have no knowledge of an account, someone could be using your identity to replace their damaged credit history. They could be paying bills on time and hoping their presence will remain undetected. If you don't recognize an account in your credit file, find out why. Take action to secure your identity now.