Credit monitoring and 'ID theft passports' The Debt Adviser by Steve Bucci • Bankrate.com

"To care for him who shall have borne the battle and for his widow and his orphan."

This is the stated mission of the Department of Veterans Affairs that we have been discussing from my previous column, "10 things the VA should do today about ID theft," which detailed what actions the VA needs to take to help veterans and active duty service personnel affected by its recent data breach. I wanted to go into greater detail here on credit/record monitoring and ID theft passports.

First, the good news is that the computer that contained the 26.5 million veterans' records has been recovered, and the FBI is offering assurances that the records were not copied.

But ID theft remains a rampant problem, and I have recommendations for keeping records safe, both for veterans and others.

Monitoring credit is a vital step. The anxiety that can accompany the realization that someone might be using your personal information to steal in your name can leave you feeling helpless.

Benefits of monitoring credit
Frequent credit-report monitoring of all three major credit bureaus and public records will help catch fraudulent activity quickly. In the private sector, credit-monitoring agencies monitor your reports for any suspicious activities. But in cases where a company or agency puts individuals at risk for ID theft by losing their credit information, that company or agency should be the one to have to pay for a monitoring service that looks at credit and other public records.

Activities that are reported are as follows:

• New accounts. • Credit inquiries. • Address changes. • Public records. • Changes to current accounts.

Monitoring will not prevent theft. However, the sooner you know that a thief is using your information, the sooner you can take action to stop it. Why use a monitoring service? Because the service checks every day and it checks more than just a credit report.

To use a monitoring service, it is necessary to give yet another party some of the same information you are afraid has been stolen. Some veterans will not be comfortable doing this after their experience with the VA. So if they want to do it themselves, they should be compensated for the expenses incurred. 

I recommend continuing the monitoring for two to seven years. A thief may decide to keep the stolen data on a shelf until the news is out of the headlines, and the notoriously short attention spans of the media, the government and the American people is turned elsewhere, before using it. Also, some creditors report to the bureaus only quarterly. In the case of the a widely publicized theft, such as the one of 26.5 million vets' records, it could have easily taken three to six months for a problem to initially show up, and another three to six months to make sure the item does not reappear on a credit report. The second year will allow monitoring to be sure any challenged items stay off the reports in question. 

If, despite assurances, there is any hint that a veteran's stolen information has been used, then all veterans' data are in clear and present danger, and I recommend that a seven-year monitoring period be applied in line with the time allowed under the Fair and Accurate Credit Transactions Act for a seven-year credit extended-fraud alert.

ID theft 'passport'
I have also recommended that the VA create a Federal Identity Theft Passport that identifies a person as a victim of data theft. There is more than bogus credit accounts at stake here. Veterans could be held accountable for unreported or untaxed earnings by the IRS, crimes committed using false documentation and so on from thieves using their stolen information.

A federal "passport" will help bolster a claim of innocence of any crimes related to a veteran's social security number or possible use of a false identity by a criminal. This document will provide an easily recognizable record that could be used to support assertions of innocence with law enforcement officers, employers, the IRS, creditors, credit bureaus and others. Several states (Nevada, Iowa, Virginia, Oklahoma, Montana, Ohio) currently have ID-theft-passport laws on the books. A federal version is called for, as this problem spans residents of all states and territories.

The Debt Adviser, Steve Bucci, is the president of Money Management International Financial Education Foundation and the author of Credit Repair Kit for Dummies. Visit MMI for additional debt advice or to ask a question of the Debt Adviser go to the "Ask the Experts" page and select "debt" as the topic.