The Federal Trade Commission estimates that as many as 9 million Americans have their identities stolen each year.  Some studies have demonstrated the number is actually much higher.  An Identity Theft Resource Center study cites the number of victims at 15 million annually.

The Better Business Bureau found that the average fraud amount per case increased from $5,249 to $6,383 from 2004 to 2006.  As a result, the total annual cost of identity fraud in the United States increased from $53.2 billion to $56.6 billion during that same time period.

What Is Identity Theft?

Typically, identity theft occurs when a thief appropriates another person’s name, address, Social Security number or other identifying information. The thief then uses that information to open new credit card accounts, take over existing accounts, obtain loans in the victim’s name or steal funds from the victim’s checking, savings, or investment accounts. Once a theft has taken place, the probability of returning everything back to “normal” for the victim is nearly impossible.

In addition to the anguish of having personal funds stolen, victims often go through difficult and time-consuming ordeals to convince lenders and credit reporting agencies that they have been victims of identity theft.  Having erroneous information removed from their credit reports can often be difficult as well.  It is often times more difficult to prove the victim was damaged than it is to even identify the perpetrator.

So how can you protect your identity and avoid the difficulties associated with this growing problem?

Identity Theft Protection Companies

The dramatic increase in identity thefts has opened opportunities for new businesses whose services help protect consumers. Companies like LifeLock and others are offering the opportunity to protect your identity, but at a cost.   These companies work by placing fraud alerts on your reports with each of the three main credit reporting agencies.

With a fraud alert on your credit report, whenever any company runs a credit check on your name or social security number, the credit reporting bureau must notify you, and they cannot issue new credit in your name without your approval.  Credit checks are carried out when someone applies for credit, a loan, a credit card etc. In addition, LifeLock will remove your name from “trigger leads,” cutting off offers for new credit cards.  In return for the service, LifeLock charges about $120 a year.

For some, the fee is worth it.  But few people realize they can undertake the same steps on their own and provide themselves the same identity theft protection without incurring a fee.

Set Your Own Fraud Alerts

It is fairly easy to place your own fraud alert on your credit report. You can place a fraud alert in your file by calling just one of the three nationwide credit reporting companies. As soon as that company processes your fraud alert, it will notify the other two, which then also must place fraud alerts in your file. Doing so should cause new credit information requests on your social security number to be validated by calling you at the phone number you provide.

It doesn't always work 100% of the time, so consumers should stay on top of their personal reports. The credit reporting bureaus also require you to renew your alert every 90 days.

Here are the websites and phone numbers to request a fraud alert be set on your personal credit file:
 
√    TransUnion: 1-800-680-7289; www.transunion.com
√    Equifax: 1-800-525-6285; www.equifax.com
√    Experian: 1-888-397-3742; www.experian.com

Remember, you only need to call one of the credit reporting agencies to request a fraud alert on your file. That agency will then notify the other two.

Opt-Out Of Pre-screened Credit Card Offers

With the credit bureaus, you also have the opportunity to “opt-out” of new credit offers. Opting-out of pre-screened credit card offers will eliminate the pre-approved credit offers that litter your mailbox.  This probably sounds like a great idea, but once you request to opt-out, you will not receive any offers of credit, including some that might be appealing to you or some in which you may be interested at a later date if your financial situation changes.

The Federal Trade Commission has established methods to allow you to opt out of prescreened offers. In addition to requiring card issuers to clearly disclose how to stop receiving offers, the FTC endorses an official phone number and website to allow you to opt out. The FTC website recommends calling 1-888-5-OPTOUT (1-888-567-8688) or visiting www.optoutprescreen.com for details. Through either method you will have the option to opt out of prescreened offers for five years or permanently.

Monitor Your Credit Report

Under the Fair Credit Reporting Act, Consumers are entitled to receive a free copy of their credit report once every 12 months.  There are many websites and commercials promoting “Free” credit reports, but often their goal is to sell you additional products. To obtain a truly free credit report on your own, visit www.annualcreditreport.com, a website owned and operated by the three credit reporting bureaus. Each individual can obtain a credit report at no charge once a year through this website.

It is recommended, however, to review your credit report more than once a year.  If a thief obtains your personal information and opens fraudulent accounts in your name, ignoring your credit report for a full year could prove disastrous.  Our recommendation is to utilize the annualcreditreport.com site once a year and following up with a second review six months later by an independent credit reporting company.  This will give you much more awareness as to your credit report standing to the credit granting world.  The Association of American Homeowners is currently negotiating a special deal for its members to get complete credit reports at discounted prices.