The other day on Fox and Friends, a certain personal finance “guru” came on to talk about identity theft prevention. Naturally, one of his answers was to push identity theft “insurance,” a product sold by one of the biggest sponsors on his program. I had to roll my eyes, because he never mentions a few things that would be far more effective.
- Freeze your credit — This is the strongest defense you have to protect your credit. A credit freeze will lock your credit file with one of the three major bureaus and prevent anyone, including you, from applying for new credit. To “thaw” your credit, you’ll need a pass code that you can apply online. A credit freeze costs between $0 to $10 for each bureau, meaning it would cost you a maximum of $30 to freeze all three credit files.
- Check your credit — Instead of applying for a credit monitoring service, just check your credit for free online. You’re entitled to a free report every year from each of the three major bureaus, so you could check one every four months. Mark it on your calendar, and you’ll have an almost constant watch on your credit files. The only website where you can check your credit for free is www.annualcreditreport.com. All other sites will charge you money — stay away from them!
- Use credit cards, not debit cards — The most common form of identity theft is account takeover fraud, which means someone simply gets access to your account number and makes charges to a piece of plastic as if they’re you. This is more dangerous with a debit card than a credit card, because a thief can take money directly out of your bank account, and getting it back may involve a fight with your bank. A charge on a credit card means only a charge will be posted on your account, which you can easily dispute without being stuck without your money for weeks at a time. (One caveat — if you know yourself to be the kind of person who won’t pay a credit card balance in its entirety every month, forget this advice. You may be more dangerous to your own wallet than an identity thief.)
- Ditch the checkbook — Do you still use a checkbook? Do you see those little numbers at the bottom? Those are all an identity thief needs to write checks and draft money from your account. Your bank likely has no security to keep this from happening, so if you still use a checkbook, keep it at home. Use your bank’s online bill pay instead.
While no solution is foolproof, the tactics listed above should give you a great head start in protecting your identity and your wallet against potential criminals.