Personal Finance: How you can (and can't) avoid identity theft
Identity theft is becoming as ubiquitous as credit card solicitations. Maybe that's an exaggeration, but it's sure starting to feel that way.
Over the past five years, 28 million Americans—or roughly 13 percent of the adult population—have fallen victim to the crime, in which thieves steal personal information to open lines of credit, obtain loans, or simply purchase goods and services in the stolen name.
In recent weeks, tens of millions more households have had their personal information lost or stolen, exposing them to a similar fate. Already, Americans are changing their behavior as a result. A new study by the Conference Board shows that 70 percent of Internet users have installed an added layer of software security protection on their home computers. Meanwhile, more than 2 out of 5 Internet users say they are making fewer purchases online as a result of fears about identity theft.
While there's certainly an argument for being more careful when surfing the Internet and making fewer online purchases, these steps will likely do little to keep you from being a victim of ID theft.
Here's why:
- The most common way consumers fall victim to ID theft is not through the high-tech landscape of the Internet but through conventional means such as a lost or stolen wallet or purse. In fact, online identity theft represents only a small minority of total ID theft cases. For example, only 5 percent of thefts came through computer spyware and only 2 percent of cases were the result of computer hackers, according to a survey by the consulting firm Javelin Strategy & Research.
- There is a good chance you know the person who stole your identity. The Javelin study found that 1 in 5 victims of ID theft last year had their identities stolen by a friend, acquaintance, relative, or employee.
- Most victims of ID theft are already doing the right thing when it comes to their online behavior. Yet they're still falling victim to this crime. For example, 66 percent of ID theft victims last year shredded their financial documents before discarding them while 60 percent used antivirus, antispyware, and firewall software.
The recent headline-grabbing stories of identity theft show that even if you play it absolutely safe by shredding your documents and making no transactions online, you're still at risk of ID theft if your bank misplaces customer data or should a retailer's computer system get hacked.
So instead of spending all your time worrying about prevention, think about monitoring your records as well. That means checking all your bank and credit card and loan statements thoroughly every month. And think about signing up for a credit-monitoring program through your bank or one of the three major credit bureaus: Experian (www.experian.com), Equifax (www.equifax.com), or TransUnion (www.transunion). Fair Isaac, which runs one of the leading credit-scoring services, also offers a credit-monitoring program through its site (www.myfico.com). These services, which can run from $40 to $100 a year, will alert you should a loan or credit card be opened up fraudulently in your name.
And don't forget that a new law makes it possible for consumers to get a free copy of each of their three credit reports annually. To learn how to obtain your free reports, go to www.annualcreditreport.com.