Vigilance best option to fight identity theft

When the feds announced the breakup of the biggest identity-theft ring ever in the United States recently, the figures were staggering: 30,000 victims and millions in losses.

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That underscores what experts have been saying for a while, that identity theft is today's fastest-growing crime, touching as many as 900,000 new victims each year.

That growth has fueled a growing field of products that promise to look over your shoulder and make sure no one has swiped your credit card number or applied for credit in your name.

In identity theft, an impostor buys cars, charges up credit cards, rents apartments in your name and then vanishes, leaving you with the bills. Usually the thief snatched your Social Security number, credit card numbers, date of birth and other personal information and has been posing as you ever since. Your credit is ruined.

Most identity-theft victims never find out how it happened. They learn of the crime when an angry creditor calls or a credit card is declined.

"The crime is definitely on the increase and it shows no sign of stopping," says Linda Sherry, editorial director at Consumer Action, a San Francisco-based consumer advocacy organization. "It's a frightening thing."

Finding out that your identity has been stolen is not the end of your woes, but the beginning. Although identity theft victims are not responsible for the debts incurred by their impostors, they are stuck cleaning up the credit mess. Restoring your credit and your name is a slow, painstaking process. It means countless phone calls, letters and time away from work.

A survey presented to the U.S. Senate Judiciary Subcommittee on Technology, Terrorism, and Government Information back in July 2000 found that on average victims spend about 175 hours on mopping up identity theft damage and that such cases take an average of two years to resolve.

Remember that's an average. Mari Frank, an identity theft victim and attorney who has written The Identity Theft Survival Kit, estimated that she spent 500 hours cleaning up her credit nightmare. Her out-of-pocket expenses were about $10,000.

There is little that a consumer can do to prevent an inside job like the big federal bust brought to light. In that case, a help-desk worker at a software company allegedly sold passwords and codes for downloading consumer credit reports.

Self-help against identity theft
However, some simple vigilant steps can help protect you from opportunists and criminals who don't have inside access:

• Avoid carrying your Social Security number and driver's license together in your wallet.
• Tear up or shred pre-approved credit card offers, bills and documents with other personal information before throwing them out.
• Drop paid bills directly into U.S. Postal Service mailboxes. Avoid putting outgoing mail in your home mailbox.

Folks who are nervous about identity theft may want to consider putting a fraud alert on their credit files. With a fraud alert, a credit bureau must contact you before any new credit can be approved. An identity theft victim puts fraud alerts on credit files to prevent an impostor from applying for and receiving credit in the victim's name.

With a fraud alert you give up the convenience of "instant credit" (so you can forget about signing up for a new credit card and going shopping with it three minutes later) but you know that no new credit can be granted in your name without your knowledge and approval.

For more information about putting a fraud alert on your credit file, contact the credit bureaus: Equifax, (800) 685-1111; Experian, (800) 311-4769; or TransUnion, (800) 888-4213.

Credit-check loopholes
Don't think that fraud alerts are foolproof, though.

"Not every type of account is covered by a fraud alert," warns Joanna Crane, identity theft program manager at the Federal Trade Commission. "You must maintain vigilance on all the different types of accounts -- investment accounts, bank accounts, credit accounts -- opened in your name."

She offers this for instance: An identity thief has enough information to open a demand deposit account in your name. In that case, the bank won't do a full credit check and is unlikely to see the fraud alerts. The thief can deposit counterfeit checks into the new account, draw against them, and you're stuck with the mess when they bounce.

"Even among credit card issuers, there are different business models," she says. "Some don't follow the fraud alert to the letter. A credit issuer who has a higher risk model may not bother ... So you can't sit back."

Although she's not in a position to recommend a specific product or service, Crane says that individuals must monitor their credit reports. To what extent is the question.

"Consumers need to do the math to figure out what works for them," she says.

If you intend to do it yourself, our credit report basics section can help you.

Crane points out that it takes time and about $9 a pop to receive a copy of a credit report from one of the three bureaus, and consumers should really check all three.

"That's a significant investment," she says.

"If you know your information has been compromised or for some other reason feel particularly vulnerable, you may want to check your credit reports more often," Crane says.

Credit-protection services increasing
Many consumer experts urge identity-theft victims to check their credit reports every three months. That means the cost in time and money will mount and you may be better served by shelling out a fee to a credit-report monitoring service. You have to decide what level of vigilance you need to maintain, she says.

The monitoring services that promise to keep a close eye on your credit report and alert you of any suspicious activity can cost anywhere from about $50 to $100 a year.

For $10.95 per quarter, TrueCredit.com offers Credit Monitor, which provides online access to your credit report, with a new report four times a year. It also provides weekly e-mail notices of new activity on your report and identity fraud resolution services.

For $89.99 per year, PrivacyGuard from Trilegiant delivers reports from all three credit bureaus, a credit score and analysis, monthly monitoring reports, forms and data for checking into driving, medical and Social Security records. Subscribers can request as many copies of their credit reports as they wish. Those who want to buy a single report online rather than subscribe can visit Trilegiant's CreditReportPlace.com.

For $69.95 per year, Equifax Credit Watch provides e-mail notification within 24 hours of new activity in your credit file. It also provides access to your Equifax Credit Report and FICO credit score up to four times per year, and it allows you to access an online history of all notifications and reports by date.

In addition, the service also includes $2,500 in identity theft insurance. After a $250 deductible is met, it can pay:

• Lost wages as a result of time taken off from work to deal with fraud, with coverage of as much as $500 per week for four weeks.
• Notary and certified mailing costs for completing and delivering fraud affidavits.
• Fees for reapplying for loans that were declined due to erroneous credit information.
• Phone charges for calling merchants, financial institutions and law enforcement agents to discuss the fraud.
• Some attorney fees.

These provisions are similar to Identity Fraud Expense coverage offered by Travelers Property Casualty in a number of states. The coverage limit is $15,000 with a $100 deductible. For an additional $25 a year, the coverage can be added to any Travelers homeowner's or rental policy in most states. The coverage is also provided automatically in a number of states as part of Travelers High Value Homeowners policy, and it is also available as a freestanding policy in some states.

Individuals on a group legal plan may want to check whether there is some identity theft assistance. For instance, ARAG Group offers plan members a toll-free number to speak with an identity-theft specialist who can give advice on how to prevent identity theft or to identify what actions members who have been victimized need to take.

Regardless of what precautions you take or don't take, everyone is at risk when it comes to identity theft.

"Ultimately, you cannot prevent identity theft from happening to you," says Beth Givens, director of the Privacy Rights Clearinghouse in San Diego. "You can only reduce your chances."

Sal Caputo is a freelance writer based in Arizona.