Thousands of Americans are victims of identity (ID) theft each year. The sad part is, most ID theft victims do not know how or when their identity was stolen. They often find out when an irate creditor or collection agency calls or a credit card is declined. To help consumers protect their identity, a number of credit monitoring and insurance protection programs are being offered by some companies. But, are these products right for you?
Most experts recommend that you obtain a copy of your credit report at least once a year from each of the three major credit bureaus (Equifax, Experian and TransUnion) to ensure accuracy and to look for signs of ID theft. But, if you find that you do not have the time to do this, you may want to subscribe to a "monitoring service." Credit bureaus or other companies usually offer this service for about $30 to $150 a year, depending on what is included.
According to the Federal Deposit Insurance Commission (FDIC), a monitoring service may provide, for example, an automatic copy of your credit report from one credit bureau or all three major companies, on a quarterly or monthly basis. You also may be able to obtain e-mail notices of any changes in a credit report, sometimes within 24 hours. The most important alert is one telling you that an account has been opened in your name. If you do not recognize it as your account, you can take immediate action to get the account closed.
Should you order your credit report on your own or pay extra for a special service? The answer depends on how closely you want to monitor your credit reports and how much you are willing to pay for convenience and other extras.
If an ID thief uses your name to commit fraud you are likely to incur expenses trying to correct your files or otherwise defending yourself. That is why some insurance and credit card companies now sell "ID theft insurance." These types of policies typically cover expenses such as lost wages; fees associated with reapplying for loans you were denied; and the costs of mailings and phone calls to creditors, credit bureaus and law enforcement agencies. The policies may also cover certain legal fees. The policies do not, however, cover losses for which you are liable by law or that are otherwise not reimbursed by a financial institution or merchant. It does not fix your credit standing nor clean up a criminal record acquired in your name by the thief.
Some consumers may already have this insurance at no extra charge through their homeowner's insurance or their credit card. If not, you may be able to purchase the coverage separately for about $25 per year or more. A deductible is usually included and can run anywhere from $100 to $500 per claim.
If you are thinking about purchasing a policy, be sure to compare the annual insurance costs with the amount you would probably recover if you were to become an ID theft vicitm. Also, you may want to get the opinion of someone knowledgeable, like a financial planner or an insurance professional you trust.
The BBB, along with the FDIC, warn consumers to beware of telephone or e-mail scams promoting credit monitoring services, "free" credit reports or ID theft insurance. Fraudulent companies often use false or misleading statements to get you to send money or divulge personal information. Always check out a company with the BBB before making a purchasing decision.