Creative Consumer: Using New Tools to Combat Identity Theft

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I've spent the past month infiltrating the Internet underworld to show viewers how identity thieves actually operate. Our investigation found that crooks buy and sell people's credit card information for a dollar or less in fast-paced chat rooms.

They then can take that data and clone your credit card with a machine that is readily available over the Internet.

After my special reports aired on World News, dozens of you wrote in and said you found the revelations frightening. I wrote two articles that explained how identity thieves most often get your information and how to protect yourself, but I found folks are hungry for yet more information. So here are some other do's and don'ts.

Pay for a Free Service?

It's tempting to outsource the task of protecting your identity, and monitoring services can be helpful. But it has come to my attention that some of these services charge money for steps you can easily take yourself.

Consumers are allowed to place a 90-day fraud alert on their credit record with the three major credit bureaus. This alert warns banks and other credit companies that they should check and make sure it's really you requesting the credit before they grant it. They usually simply call you to verify. Most people use this tool after their identity has been breached, but you can also do it pre-emptively.

Some commercial services place and renew these fraud alerts for you for a fee. It's up to you whether you're willing to pay for somebody else to do this chore.

You should know that whether you place a fraud alert yourself or hire somebody else to do it you won't be able to get instant credit in stores and such. You'll still be able to get loans and credit cards, but it will take longer. (If you need help managing impulse spending, this could be a good thing.)

Oh, and rest assured, placing a fraud alert on your credit report does not harm your credit rating in any way.

Consider a Credit Freeze

Late last year, consumers gained a new tool under the Identity Theft Protection Law. You now can block access to your credit report entirely. It's called a Credit Freeze. This prevents thieves from opening accounts in your name because the companies they approach have no way to check your creditworthiness.

Once you freeze your credit, the only entities that can access it are companies you already do business with, such as your credit card and mortgage companies and law enforcement agencies. You choose a secret password at the three major credit bureaus (Equifax, Experian, TransUnion), and that password is required to access your credit file.

The downside is that, like with a fraud alert, your ability to get new credit yourself is slowed. One benefit you may appreciate is that this will stop the flow of unsolicited credit card offers that you probably receive in the mail.

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