A colleague of mine often jokes that he recently had his identity stolen and his credit score increased. If you wouldn’t expect this to be the result for you, you may want to take steps to protect yourself.
Identity theft is a serious problem. In 2007, more than 8 million Americans were affected at a total estimated cost of $49 billion, according to the Privacy Rights Clearinghouse. The effects are most often financial—the average incident sets a person back $5,720. It is hugely disruptive of one’s life, taking, on average 25 hours to resolve. But the effects can be even more dire. Criminals have been known to assume someone else’s identity when arrested. They then skip bail and the bench warrant is issued on the unsuspecting innocent. Spending the night in jail, I’m told, is no fun.
Fortunately, taking a few prudent steps can reduce most of the risk of ever being a victim of identity theft.
One key way to avoid the financial effects of identity theft is to never pay with your money—at least not initially. This tip was shared with our firm by no less than Frank Abagnale, the once con-man now FBI consultant on whose life the movie “Catch Me If You Can” was based. Mr. Abagnale, who in his criminal days forged more than $2.5 million worth of checks, told us to pay for everything on a credit card. This puts the bank’s money at risk, not yours, should someone get a hold of your account. When the bill arrives, you can dispute the charges and the bank takes it from there.
I know from experience that this works, as I once went on a shopping spree in Brazil with a Citibank Visa Card, even though I’ve never been to the country. The bank held me harmless. In another instance, my house was burglarized when I lived in San Francisco. The thieves got my wife’s jewelry, were able to spend my $50 but I never paid for the gas they put on my stolen credit card.
An added benefit: The card issuer may reward you in cash back or gift-card like credits for using their card.
Other prudent steps to take to guard one’s identity include an annual check of your credit report. This will allow you to see if anyone is doing business in your name. You can log on to annualcreditreport.com for a free copy of your report.
It is important to guard your Social Security number. It’s a good idea not to have it on your checks. Provide it only to trusted institutions and individuals for legitimate purposes, such as opening an investment or bank account.
Don’t discard your junk mail and old bank and investment statements—shred them. And don’t just shred them with any shredder, make sure to use a cross-cut shredder. Anyone dumpster diving for your information will only come up with confetti, not useful information.
Moving from the physical world to cyberspace, it’s critical to protect yourself from predators. Install firewalls and keep them updated. Don’t respond to solicitations that can’t be confirmed to be from reputable sources. When you discard your old computer, make sure you wipe the hard drive clean with dedicated software. The delete function does not get the job done.
Finally, or perhaps even initially, consider purchasing home and auto insurance that provides for identity theft protection. An insurance company can’t prevent the theft any more than it can prevent the car accident or tree falling on the house. What it can do, however, is to assume the financial risk of the event for a set premium and provide skilled help in fixing the mess should it occur.
It is a bit sobering to think that in my relatively short lifetime I have gone from living in a community in which we not only didn’t lock the house but also left keys in car ignitions to a world in which we have to guard our Social Security numbers. But that is simply how it is. We just have to deal with it.