How to Protect Yourself After Identity Theft

It looks like my personal information may have been stolen in two data breaches just in the past few months, and I’m wondering whether I should sign up for an identity-theft protection service. What do you think?

If you’re offered free ID-theft protection because of a breach, take it. But look carefully at the coverage and your risks before paying for the service.

First, find out what information was stolen in the breach. “The majority of the breaches we’ve seen lately have not involved Social Security numbers,” says Paul Stephens, director of policy and advocacy for the Privacy Rights Clearinghouse. The personal data stolen from Michael’s craft stores, for example, included credit card and debit card numbers instead, making it most important to monitor your bank accounts for suspicious activity. Many banks let you sign up for e-mails or text messages alerting you of transactions over a certain size. See the Identity Theft Resource Center for details about each breach.

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If your Social Security number was stolen, most ID-theft monitoring services won’t detect a problem until after a thief tries to take out credit in your name. Instead, you can help prevent ID theft by freezing your records at the three credit bureaus (Experian, Equifax and TransUnion). It generally costs about $5 to $10 each time you freeze and thaw your credit report, depending on the state (some offer free freezes for ID-theft victims). You’ll need to thaw your account before you can apply for credit with a new lender. See How a Credit Freeze Works for details and links.

You can do some monitoring on your own by ordering a free copy of your credit report from each of the three bureaus every 12 months at AnnualCreditReport.com; stagger your requests so you can get one free copy every four months. Check whether you already have ID-theft coverage through your bank, employer or insurance company. Many are starting to provide such protection as an extra employee or customer benefit.

If you want to buy your own ID-theft protection, compare the costs -- prices can range widely, with some services costing less than $100 per year and others charging hundreds of dollars. And understand exactly what services are provided. “There has been a problem in general with some ID-theft services claiming to do more than they actually do,” says Susan Grant, director of consumer protection at the Consumer Federation of America. “We tell them to steer clear of anybody who says they will prevent you from becoming an ID-theft victim because no one can really make that claim.”

Make sure that medical, employment, tax and criminal ID theft are monitored and covered. They can be more difficult to untangle than credit theft, says Grant.

Also see the Consumer Federation of America’s ID theft services best practices report for a detailed list of what to look for in an ID-theft protection service. Some services only monitor your credit report at one bureau, for example, or send you a kit of general information (which you could get free from the Federal Trade Commission) to help you resolve ID-theft issues. Others may exclude preexisting ID-theft issues. More-robust services monitor all three credit reports, plus public records and databases, provide one-on-one counseling and contact your creditors to resolve any problems.

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.