Are You Protecting Your Money From Identity Thieves?

Good to Know

Anyone with assets, an income stream, or a good credit score can be exposed to identity theft. But before going deeper, let’s dispel a few myths—identify theft happens not only to the wealthy but also to the poor, not only to seniors but also to the young, and not only to financial neophytes but also to the financially sophisticated.

Candidly, a member of the author’s family was a victim of identity theft over 30 years ago, well before identity theft reached epidemic proportions. The first inkling of the problem was a handwritten, personally signed thank you letter¹ from the manager of a high-end jewelry store in a nearby town. Thankfully, the issue was resolved in less than two years without financial loss to the author’s family but required dozens of affidavits to creditors and testimony before a judge.

How have you protected your money and identity from identity thieves? This article addresses three potential strategies to inform your identity protection plan, including:

Do it yourself (DIY),
Paid monitoring services, and
Insurance.

Do It Yourself

The DIY approach is frequently effective and free (or almost free). However, as you might expect with a free service, there may be gaps in your protection. Here’s one approach to structuring a DIY plan:

Freeze access to your credit information,
Set up monitoring and fraud alerts, and
Other simple, low-cost steps.

Freeze Access to Your Credit Information

First and foremost, freeze your credit with the Equifax, Experian, and Transunion credit bureaus (yes—you should freeze all three). The “freeze” may be referred to as a “credit freeze” or “security freeze” and should be available to you at low to no charge. Here’s how freezing works—essentially no one can access your credit file. An example follows.
If a scammer steals your Social Security number and tries to open new credit accounts in your name, the credit bureau will not allow access to your credit information. What’s the net result? Potential new creditors are unlikely to extend credit because they can’t get your credit score or history.
But what if you want to get a new credit card or buy a house? You’ll have to temporarily unfreeze (thaw) access to your credit records and scores. Refreeze your credit after you’ve obtained the desired loan or credit card. Caveat—freezing will not prevent identity theft or the fraudulent use of existing credit, such as credit cards.

Credit Monitoring and Fraud Alerts

The three credit bureaus offer free or low-cost monitoring at these links—Equifax, Experian, and Transunion. Be sure to monitor your credit activity regularly to help identify fraudulent charges, unauthorized new accounts, or erroneous late payments. Add fraud alerts to each of your credit bureaus as well.
Free or low-cost monitoring is also available from third-party apps such as Credit Karma and Credit Sesame. We neither recommend nor endorse specific third-party apps—you’ll need to do your own due diligence before selecting an app.
Your bank and credit card companies generally offer free monitoring, credit card transaction alerts, and suspicious activity notices as well. Set up these alerts for each of your banking relationships and credit relationships. Heads up—avoid interruptions to your credit by alerting your bank or credit card company in advance for any large purchases or travel outside of the country you’re planning.

Other Simple, Low-Cost Steps

Obtain an identity protection PIN from the IRS. Before scoffing at this suggestion, know that an increasing scam involves filing false returns under your Social Security number to create and steal bogus tax refunds.
Change passwords frequently, at least quarterly. Do not write them down! Get a free or low-cost password keeper to make your passwords accessible to you and no one else. If you’re up for it, consider using a random password generator. Once again, we neither recommend nor endorse specific third-party apps—perform your own due diligence before selecting an app. Your password should not be easy to guess. For example, thou shalt not use your spouse’s birthday! Heads up—your postings to social media should include no personal financial information and (sorry for this, you social media aficionados) as little personal information as possible, no matter how benign the information may seem. While you’re at it, be sure your secret password reset answers are virtually impossible to guess and keep them in your password keeper.
Protect your Social Security number at all costs—do not carry your Social Security card in your purse or wallet. This number is the holy grail for identity thieves—finding the number in a lost purse or wallet is reason to celebrate for the bad guys. Never give your Social Number to anyone over the phone, by text, or by email. You might ask, what about the IRS? The IRS will not ask for your Social Security number over the phone, by text, or online. How about identity theft risks for your Social Security account? A heads-up play here is to set up a “My SSA” account with Social Security to further safeguard your information.
Act immediately if you receive a “Move Validation Letter” from the U.S. Post Office asking you to confirm a new, bogus address. Call the 1-800 number on the back of the notice without delay to report that the new address is bogus. Also alert your mortgage company, bank, credit card companies, and credit bureaus. Here’s one reason to act promptly—a fraudster trying to steal your IRS refund may need the IRS check to go to an address other than yours.
The author once had a client that insisted on shredding all junk mail she received. She took some good-natured ribbing from friends about her “overkill on the privacy” but her caution was wise then and is even wiser now. Any piece of mail with personal information on it, such as a “You’ve been approved for a new credit card” letter, should be shredded with a modern shredder. A complementary strategy here is to opt out of unsolicited offers.

Paid Monitoring Services

Those of us with careers, families, church commitments, and hobbies are at a disadvantage when it comes to DIY identity theft protection. Clever bad guys around the world may literally have nothing else to do besides scheming new ways to steal your identity. Every time a countermeasure is created to thwart one type of attack, another scam seems to spring up all too quickly. We suggest that there are at least three reasons to pay for identity theft protection.

You simply do not have the daily or weekly time to actively invest in the DIY approach,
You are not willing to freeze your credit accounts with the credit bureaus, or
You are at high risk for identity theft.

A fully objective rating of the different services available is difficult to find but here are a few questions to ask:

What specific transactions, requests for new credit, or other potential threats will be monitored?
How quickly do you provide alerts of suspicious or potential identity theft financial occurrences?
What recovery services do you offer to help recover lost money and repair my credit score?

Identity Theft Insurance

It’s difficult to fully protect against identify theft losses using the DIY strategy or Paid Monitoring strategy. As just one example, not all strategies monitor the “dark web.” According to one source,² you can buy credit card numbers, stolen subscription credentials, and hire hackers to attack computers for you.

Be aware, that some, but not all, paid monitoring services will include a measure of identity theft insurance protection. Consider adding insurance protection to your risk management strategy if you need the highest level of loss protection available, you’ve had your identity stolen in the past, and you do not have identity theft insurance currently in place.

Takeaways

There is no “one size fits all” strategy. Consider the points raised in this article and discuss the next steps for your unique situation with your financial advisor, CFP^® Certificant, attorney, or CPA.

Disclaimer

The information presented herein is provided purely for educational purposes and to raise awareness of these issues; it is not meant to provide and should not be used to provide identity theft protection, investment, income tax, risk management, retirement, estate, or financial planning advice of any kind. An experienced and credentialed expert should be consulted before making decisions relating to the topics covered herein. There are variations, alternatives, and exceptions to this material that could not be covered within the scope of this blog.

¹ Here’s a quick translation for the Gen Z’ers reading this—after the earth cooled and shortly after the dinosaurs died, we communicated with each other by letter using paper, pen, and postage stamps. Delivery required days, not milliseconds.

²https://www.csoonline.com/article/3249765/what-is-the-dark-web-how-to-access-it-and-what-youll-find.html