Mellody's Money Minute: Identity Theft
The latest on credit freezing and how file sharing may make you vulnerable.
Nov. 9, 2007 — -- More than 10 million Americans are victims of identity theft each year, which comes with a hefty price to both consumers and businesses, costing more than $50 billion annually.
With the rise in theft, government and various industries, including financial services, are arming consumers with different ways to protect themselves. Although 39 states and the District of Columbia have already enacted laws providing consumers with the right to freeze their credit files, the three big credit bureaus -- Experian, TransUnion and Equifax -- recently took this a step further and announced plans to voluntarily offer this option to consumers in all 50 states, effective this month.
With the holiday shopping season fast approaching, identity thieves, like retailers, are gearing up for one of their busiest times of the year. So, is now the time for you to consider freezing your credit?
Mellody Hobson talked to "Good Morning America" to explain what it all means and whether this is a step you should take to protect yourself.
What exactly is a credit freeze?
If you choose to freeze your credit, almost no one can access your credit history or credit score from a credit reporting agency without your specific permission. There are two main exceptions: your current creditors -- like your mortgage lender and credit card companies -- and law enforcement. So, what does this mean? Basically, a credit freeze makes it incredibly difficult, if not impossible, for identity thieves to open new accounts in your name, even if they have your Social Security number, address, birth date, etc.
Are you still able to apply for a loan or a credit card if your credit files are frozen?
Yes, but it may preclude you from taking advantage of instant credit approval. For example, if you are looking to buy a new car or open a new credit card, you will need to request a temporary suspension on the security freeze, usually in writing. Currently, it may take up to a few days for the freeze to be lifted, but beginning next year, many states will require a lift to take effect as quickly as 15 minutes after the request is made.
While the rules vary by state, generally, you will need to send the request in writing to each of the three credit reporting agencies (Equifax, TransUnion and Experian). Your request will need to include personal information such as your full legal name, Social Security number, date of birth, proof of residence, as well as address history and any name changes.
Usually, a credit freeze is free for victims of identity theft, but other consumers will be assessed fees. Depending on your state of residence, you will need to pay an average of $3 to $10 to enact a freeze, and then an additional $3 to $10 per request to temporarily suspend a freeze or permanently remove it.
Does it make sense for everyone to freeze their credit files?
While freezing your credit is one of the most effective tools for preventing new account fraud, it is not an ideal solution for everyone. It makes the most sense for victims of identity theft, as well as those individuals who will not be applying for new credit, such as the elderly or children.
So, how else can people protect themselves against identity theft?
First and foremost, I encourage everyone to take advantage of accessing a copy of their credit report for free each year. You can request a copy online at www.annualcreditreport.com; by phone at 877-322-8228; or mail to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. It is an easy way to monitor your credit activity and make sure the data is accurate and up to date. Absolutely, and sometimes the risks are more hidden than you think. For example, if you use a file-sharing service to share digital content -- like music and movies -- over the Internet, you could be putting yourself at risk, especially if you save file-sharing software in the same location on your computer as any files containing proprietary information. You need to be very cautious about where you store confidential data and carefully review the type of file-sharing software you download. Ideally, you want a product which only allows media files to be shared, and NOT Word documents, PDFs or text documents.
Identity thieves are still going about their crimes the old fashioned way though. Tell us more pretexting.
Pretexting is the practice of obtaining personal information about someone using false pretenses. For example, a pretexter might call and claim they are conducting a survey, and request some personal information from you like your name, birth date, Social Security number, etc.
Once they have this information, they may use it to open accounts in your name, borrow money or make purchases. To protect yourself, do not give out personal information over the phone, mail or e-mail unless you have initiated the contact. It is also critically important to be informed about the information sharing policies of your bank and other vendors that you use. Be watchful of your billing cycles, and last, but not least, as I mentioned earlier, monitor your credit report annually for any usual activity.
Related Stories
ABC News Live