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Dealing with theft of information

It seems as though every day, another laptop laden with consumer data goes missing or someone hacks into a company server and accesses customer information.

As of June 15, 2009, the Identity Theft Resource Center has documented some 250 security breaches, a record number of breaches for the first half of the year. In 2008, the ITRC reported a total of 656 breaches, a year-over-year increase of 47 percent.

Unfortunately, many different companies, agencies and other entities handle our personal information, including Social Security numbers, throughout our lifetimes as consumers, and any of those could suffer a breach.

"Our data is in the hands of hundreds of companies by the time we reach our 30s," says Linda Foley, co-founder of San Diego-based Identity Theft Resource Center, a nonprofit organization. "Think of how many job applications you've filled out, how many credit applications, tenancy applications, college applications. All that required your Social Security number somewhere along the line."

If you're notified that a breach exposed your personal information, don't panic. Focus on the type of data lost and how to most appropriately deal with the risk of identity fraud you're facing, if any.

What kind of data is it anyway?

Not every data breach warrants drastic precautions. It depends on the type of information exposed. For instance, if it's just your e-mail address, then you might face some serious spam, but no real financial loss.

"However, a majority of the data breaches do involve what we consider to be important information that might potentially expose the individual to identity theft. Those are the ones that consumers really need to be concerned about," says Paul Stephens, director of policy and advocacy for the Privacy Rights Clearinghouse in San Diego.

Essentially the breaches that make consumers susceptible to identity fraud include those that divulge either existing account information (debit, credit cards and other financial accounts) or data that could be used to create new accounts in that person's name.

If the breach only involves debit or credit card information but not your Social Security number, then likely you're only facing an existing account breach, he says. Existing account breaches are much easier to handle because you can cancel cards, have account numbers changed and monitor periodic statements for fraudulent transactions.

"I'd rather see a breach where a credit card was involved than a Social Security number was involved any day," says Foley. "I can cancel the credit card. I can't cancel my Social Security number."

Just make sure to report affected accounts immediately so you don't wind up responsible for fraudulent charges or suffer financial losses.

If the lost data involved driver's license information, notify your state's department of motor vehicles. Also consider whether your Social Security number was on the card somewhere. If it was, then you need to take certain steps to protect yourself.

Set up a credit freeze or fraud alert. "In most situations, we're going to recommend as a very first step, a fraud alert," says Stephens.

You can set up an initial fraud alert by calling one of the three nationwide credit bureaus -- Equifax, Experian or TransUnion -- who will then set fraud alerts at the other two agencies.

The initial fraud alert, which costs consumers nothing and lasts 90 days, is a notation on the consumer's credit report informing businesses that check it that the consumer may be a victim of fraud. It asks the creditor to take additional verification steps, such as calling the consumer at a certain phone number, but sometimes, especially in an instant credit situation, the credit issuer may simply deny the applicant credit.

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The better level of protection is provided by a security freeze, Stephens says. However, security freezes generally aren’t free unless you can prove that you're an ID theft victim, and you have to pay a fee every time you remove or reinstate the freeze. The major credit reporting agencies do not share credit freezes, and so you must place one at each bureau.

The credit freeze comes with several pros and cons. It prevents new creditors or service providers from obtaining your credit report or score unless the freeze is lifted in advance. Since creditors will not be able to see the credit report, they are less likely to grant credit to the applicant.

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