Asset Protection BLOG - Mark Nestmann: You Can Protect Yourself from Identity Theft

In yesterday's blog entry, I described the rapidly increasing risk that identity theft poses to every American.

Fortunately, you can take a simple and nearly foolproof precaution that will virtually guarantee that you won't become a victim. It takes about 15 minutes to implement this recommendation. Just don't count on credit bureaus, banks, or merchants to tell you about it though, for reasons I'll describe in a moment.

What you need to do is to place a "credit freeze" on your credit file. A credit freeze, in effect, places an electronic padlock on your credit report. No one can review your credit report until you remove the padlock. And if a company can't review your credit report, it's very unlikely to issue you (or an impostor) credit.

The best news: all three major credit bureaus now offer credit freezes to anyone who requests it! The service is often free, although in some states, you will need to pay a nominal fee (normally, $10).

To freeze your credit file, send a letter via certified mail to the following addresses:

Experian Security Freeze, P.O. Box 9554, Allen, TX 75013
Equifax Security Freeze, P.O. Box 105788, Atlanta, GA 30348
Trans Union Consumer Protection Center, P.O Box 6790, Fullerton CA 92634

The letter should state your full name, address, Social Security number, and that you wish to place a "security freeze" on your credit file. (Credit bureaus don't use the phrase "credit freeze," although that's what it is.) In addition, enclose a copy of a government issued identification card, such as a driver’s license, state or military ID card, etc., and one copy of a utility bill, bank or insurance statement, etc.

For specific requirements from each credit bureau, see the following links:

http://www.experian.com/consumer/security_freeze.html
http://www.transunion.com/corporate/personal/fraudIdentityTheft/preventing/securityFreeze.page
http://www.equifax.com/cs/Satellite?c=EFX_ContentRoot&cid=1165203975981&pagename=5-1%2F5-1_Layout

Why aren't credit bureaus, banks, and merchants shouting from the rooftops the benefits of a credit freeze? The reason is simple. Anyone who places an "electronic padlock" on their credit file won't be able to make an impulse purchase by obtaining "instant credit" at an electronics store, car dealership, etc.

Impulse buyers are the most lucrative prospects of all for any retailer, because they want to buy "now," and aren't that concerned about price. Sales personnel are trained to say something like, "Don't worry about what it costs—you won't need to make any payments until next year!"

With a credit freeze in effect, you won't be able to make an impulse purchase. Instead, you'll need to contact the credit bureau to remove the padlock from your credit file. This costs $10 and a few minutes of your time online or over the phone.

The biggest practical drawback to a credit freeze is that an increasing number of companies demand access to credit reports to establish service. For instance, you may find banks, phone companies, landlords, and even your employer want access to your credit report when you set up service or open an account. On the other hand, companies that have an existing relationship with you can continue to access your credit file, even with a credit freeze in effect.

In addition, if you're planning a major purchase—buying a home, for instance—and require financing for that purchase, you'll want to remove the credit freeze from your credit file.

Is giving up the ability to purchase a big-ticket item with "instant credit" worth virtual total protection from identity theft? Only you can answer that question, but for me, the choice is clear:

"Freeze me!"

For hundreds more suggestions on how to protect your privacy and wealth, click here.