Put the Deep Freeze on your Credit

About four months ago, it happened to me.  Yes, I know I teach this financial stuff all the time, but no matter how hard I tried it blindsided me.  That's right -- I'm talking about identity theft.

My family and I were traveling home to visit our extended families in Georgia.  Since we always drive (believe it or not, we actually DO enjoy the 20 hour trip together), we typically stop overnight and finish the excursion the next day. 

Because of the threat of identity theft and fraud that continually haunts more Americans every day, last year we began using a credit card for online, phone and travel purchases.  Hold on all you Dave Ramsey fans -- we don't use the card for ANY other purpose.  We began this policy (and yes, I do recommend it to my clients and listeners) due to the real likelihood of fraud, highlighted by one of my staff financial coaches having their bank account wiped out when they used their debit card for a phone purchase.  They eventually had their balance restored by the bank ... almost two weeks later.  Ouch!

I believe the theft occured when we checked into the hotel at 2 am.  The desk clerk (alleged thief) took my credit card for verification since we'd already paid online through Hotwire.  Thinking nothing of it, we checked out the next morning, continued on to Georgia and had a great time with our families.  Everything was cool until ...

We received our card statement a few weeks later.  Lori called me frantically at work to tell me had over $3000 in unauthorized charges (ultimately, it grew to over $4000).  Fortunately, after several conversations with Amex and the local police department, the full amount was credited to our account.  Bullet dodged.

But, during the episode I discovered something very important -- and quite shocking -- that I hadn't realized until that moment.  In practically all states, with all 3 credit bureaus (Equifax, TransUnion, Experian), you couldn't place a security freeze your credit file unless you were already a victim of this potentially devastating financial crime.  As consumers, we weren't allowed to use the one silver bullet available to us that absolutely can stop a criminal in his tracks -- totally lock down access to our credit.  Until now.

Breaking ranks with Equifax and Experian, TransUnion announced they will allow individuals in all 50 states to freeze their credit histories effective Oct. 15, 2007.  Back in June '07, a USA Today story described how the Big Three credit bureaus had lobbied for two years to stop strong credit-freeze laws from being adopted at the federal and state levels (thank you, our federal and state representatives).  The reason:  the bureaus make hundreds of millions selling credit histories to lenders so they may issue credit card, mortgage, insurance, etc loans and applications.  Also, no doubt there is a fear that without easy access credit files that borrowing will take a hit.  And, we know how much Americans and creditors depend on borrowing to fuel our insatiable need for stuff.  Buying stuff we want but don't need fuels our economy.

A credit freeze bars the bureaus from issuing your credit history -- and subsequently your credit score -- to prospective lenders.  Putting a freeze on your information means identify thieves can't use stolen information to fraudulently open new accounts in your name.  The only way to open new accounts is for the consumer themself to temporarily lift or remove it. 

It's still up in the air if Experian and Equifax will follow TransUnion's example of doing the right thing for consumers.  If they don't all offer a national freeze, we won't be fully protected since thieves may still open an account if the prospective lender obtains their credit history from a bureau other than TransUnion.  The barn door would be locked, while leaving the side door and back gate open.

TransUnion will offer the security freeze service free to ID theft victims and charge $10 to all others.  It will cost $10 to temporarily lift or remove it.

What should you do to protect yourself now so you don't become one of the estimated 27,000 daily victims of identity theft?

• Make a copy (front and back) of every important paper in your wallet or purse.  You'll have account #s and contact info handy if they are stolen
• Include only your first initial, last name and address on your checks.  Don't include your Social Security or driver's license numbers.
• Do not carry your Social Security card.
• Contact TransUnion on Oct 15 and place a credit freeze on your account
• Shred all credit offers, insurance offers, etc (anything with personal information on it) before you dispose of it
• Opt out of the credit bureau and Direct Marketing Association marketing lists (go to www.chuckbowen.net and look for the links under "MoneyWise Tools")