The FTC estimates that as many as 9 million Americans have their identities stolen each year. And that number grows each year as the thieves get smarter and more Americans move information into digital formats.
But as this problem grows we also see the growth of an entirely new industry – identity theft protection. Banks, credit bureaus, and a host of companies are now providing identity theft protection for prices ranging from a few dollars a month to over $100 per year… but are they worth it?
What Does ID Protection Provide?
Most ID theft protection companies provide a standard fare of services in three major areas: prevention, detection, and identity restoration.
ID theft prevention is actually a lesser-known service, with most people focusing on ID theft detection instead. However, many companies offer services to prevent fraud from even happening by setting and renewing fraud alerts with major credit agencies. The fraud alerts tell the credit bureaus that you your identity may have been compromised, alerting creditors to actually contact you to confirm your identity before opening a new account. In addition, some companies offer to remove you from pre-approved credit offers to decrease the likelihood of someone filling one out in your name.
In terms of helping detect ID fraud, most companies offer some sort of 24/7 continuous credit monitoring service, alerting you to any inquiries into your credit, new accounts opened, or changes to your personal information. Annual or even monthly credit reports are also standard menu items for detection services.
Identity restoration is usually offered in the form of ID Theft “insurance.” The policies, ranging from $20,000 to $1,00,000 are meant to reimburse you for any damages incurred from your identity actually being stolen. Did someone open a new credit card account in your name and rack up $10k in charges? Your ID theft insurance would, in theory, pick up the tab.
Can I Do This Myself?
The underlying worth of ID theft protection is the convenience. There’s no magical product that these companies offer, no “new” service. After doing a little bit of research you’ll come to find out that you can do almost everything the ID theft protection companies do yourself… for free. So the question you have to ask yourself is whether or not the $19/month is worth your time. In a recent FTC study, the median amount of time spent resolving ID theft was found to be four hours. And 10% of victims spent more than 55 hours resolving their problems. So if you can spend a few hours a year maintaining an ID theft protection regimen then you probably shouldn’t waste your money on someone else’s services.
How Can I Do This On My Own?
If you’d like to provide your own ID theft protection, here are a few places to start:
First, skip the insurance. According to a report by Javelin Strategy and Research, consumers spend an average of $422 out of pocket to resolve identity fraud, could spend more than $900 in cases where the fraud goes undetected until a debt collector gets involved or the victim is denied credit. According to another Federal Trade Commission study, in more than 50% of the cases, victims incurred no out-of-pocket expenses for ID theft. In fact, you’re liable for only $50 in unauthorized credit-card charges, and that’s usually waived. Also, take a minute to call your bank, credit union, and homeowners insurance company – you may find they offer identity theft insurance to you for free just for being a customer.
As mentioned above, the best way to prevent ID theft is to contact one credit bureau (which will in turn contact the others) every 90 days to put a fraud alert on your account. The problem is, without proof of actual fraud, you can’t request an extended fraud alert, hence the renewal every 90 days. Alternatively, you can place a freeze on your credit. The rules are different between states, so you should check with your state consumer organization to find out what the rules for credit freezes are. Credit freezes prevent both fraudulent and legitimate lenders from reviewing your credit report without your consent, giving you perhaps more protection than you want. It’s most effective when you’re dealing with an aggressive identity thief, or fear that someone â€” such as an angry ex-spouse â€” is trying to ruin your credit.
In terms of credit monitoring, laws are now in place to allow you to receive one FREE credit report from each of the major credit agencies EACH YEAR. This allows you to request a free credit report every 4 months throughout the year (there are 3 major agencies). Start by going to https://www.annualcreditreport.com/cra/index.jsp . And putting a fraud alert on your account every 90 days as mentioned above entitles you to a free copy of your credit report from each of the three credit bureaus every 90 days. That’s 15 free credit reports a year – definitely more information than you probably need to adequately monitor your credit.
If by chance you are the victim of identity theft, there are a number of organizations that provide free help and support. Since this topic could be the subject of its own post I’ll point you instead to the Identity Theft Resource Center, the Privacy Rights Clearinghouse, the FTC’s Identity Theft Site, and the attorney general’s office in some states.
Where Can I Purchase ID Theft Protection?
As with any type of financial service, be sure to do your homework before purchasing. Starting with this post is a good start – congratulations! As a next step, assess what type of protection you’re looking for and the places you can find it. Are you willing to do some of the leg work and want to buy only insurance? Do you want to pay only for credit monitoring? There are a few sites out there such as ConsumerCompare.org that present an easy-to-read chart of ID Theft Protection services and what’s offered by each. Be sure to focus not only on price, but check the “small print” to see if the services offered have any sort of limitations. Also, be on the lookout for reviews from actual customers – ones that have and have not been hit by identity theft.