How to put a block on your credit
Last week, banking regulators approved a rule requiring financial institutions to alert customers about security breaches if the companies believe the information will be misused. The rule, in the works for several years, followed several widely publicized security violations.
In February, ChoicePoint, a giant data broker, revealed that a crime ring had obtained sensitive digital information, such as Social Security numbers and credit reports, for at least 145,000 people.
If you receive a notice that your personal information may have been stolen, you should act quickly to safeguard your identity.
For most consumers, that means putting a fraud alert on your credit reports, which tells lenders, creditors and others that you may have been the victim of identity theft. There are three kinds:
•Initial alert. If you get a notice of a security breach, this should be your first step. The alert will remain on your credit reports for 90 days. You only have to contact one of the three major credit reporting agencies to place an initial alert (see box); it will notify the other two.
You'll be asked to provide a phone number where you can be reached so creditors can confirm your identity before opening a new account. While the alert is on your file, you probably won't be able to get instant credit.
When you file an alert, you'll also be eligible for a free credit report from each of the three credit reporting agencies. However, you may have to request it.
•Extended fraud alert. This alert remains on your credit file for seven years.
To obtain an extended fraud alert, you'll be asked to provide evidence you've been victimized, such as a police report, says Gail Hillebrand, attorney for Consumers Union.
You can request that the fraud alert be removed before the seven-year period expires. You'll need to make that request in writing and provide information to verify your identity, says Robin Holland, senior vice president of consumer affairs at Equifax. Those procedures are designed to prevent criminals from having fraud alerts removed from victims' accounts, she says.
•Military fraud alert. This service is available to members of the military who are on active duty. It's designed to prevent thieves from opening accounts in their names while they're overseas.
Active duty personnel don't have to prove they've been a victim of identity theft to request a military fraud
The fraud alerts provide some protection against identity theft, but they don't go far enough, consumer advocates say.
A 90-day alert may expire before thieves use your information, Hillebrand says.
And without proof you've been victimized, you can't get an extended alert, says Beth Givens, director of the Privacy Rights Clearinghouse.
"Credit bureaus have put individuals in a very bad position," she says. If a consumer receives notice of a possible security breach, "there's no crystal ball that's going to tell that individual when or if the criminal is going to use their identifying information."
If you're concerned that a 90-day alert won't provide enough protection, you have a couple of alternatives:
•A credit freeze. A freeze allows you to block access to your credit report and score, and prevents identity thieves from opening new accounts in your name.
Currently, California residents can put a freeze on their credit reports; several other states have similar laws scheduled to take effect later this year.
Because a credit freeze also prevents legitimate lenders from reviewing your credit report without your consent, it may provide more protection than many consumers need, Givens says. It's most effective when you're dealing with an aggressive identity thief, or fear that someone — such as an angry ex-spouse — is trying to ruin your credit, she says.
•Credit monitoring. All three credit bureaus offer credit-monitoring services. The services typically notify you when there has been a change in your credit file, such as a new account or credit inquiry.
If you're interested, look for a low-cost service that monitors all three credit reports, Givens says.
The no-cost option
Alternatively, you can create your own monitoring system for free, Givens says.
A new federal law allows consumers to order one free credit report annually from each of the credit bureaus. The free reports are available to consumers in the West and Midwest and will be available nationwide in September.
Stagger your requests so you receive one credit report every four months. You can monitor your reports for changes in your account.
For more information, go to www.ftc.gov and click on the link to free credit reports.
Sandra Block covers personal finance for USA TODAY. Her Your Money column appears Tuesdays. Click here for an index of Your Money columns. E-mail her at: email@example.com .Source: usatoday30.usatoday.com