Since the 2014 Target store breach exposing millions of credit cards, identity theft has been on the rise. It has also gained the attention of the media. The benefit of this is that more people are aware of the risks and the fact that no one is immune from being the next victim.
What is unfortunate is that there are companies willing to take advantage of the situation by selling services and products that claim to protect you and your personal information. I am sure you have seen the ads touting a “million-dollar guarantee,” or the ability to post your social security number on billboards and websites. While these are brilliant marketing schemes, that is all they are.
One such company has been fined twice by the Federal Trade Commission (FTC) for deceptive advertising and was accused of failing to protect customer information. Does this sound like a program that will prevent identity theft? If not, then what are your options for ensuring your personal and financial information is secure?
First and foremost, you need to understand that identity theft cannot be prevented. There is no service or product that you can buy that will stop this from happening to you. The main reason is because you are not truly in control of your sensitive information. Think for a moment about all of the businesses, credit companies, banks, doctors, hospitals, schools, and other institutions that you have provided with your information. Can you guarantee that each and every one of these will protect it like you would?
Did you know that since 2005 there have been over 6,000 reported data security breaches resulting in almost 900 million records exposed nationwide? These statistics come from the Identity Theft Resource Center, a non-profit that tracks these breaches. Based on these numbers, there is a high probability that some of your information has also been exposed. If you cannot control the access and distribution of your information, how can you expect to protect your identity? You can’t. The best you can do is vigilantly monitor for warning signs and take immediate action is any suspicious activity is detected.
Credit monitoring has been marketed as the best way to protect your identity, but the only thing monitoring can do is to detect a problem after it occurs. This is detection, not prevention. While it is good to monitor for fraudulent activity, you need to know what exactly is being monitored.
Credit monitoring examines your credits reports for changes, including inquiries for new credit, accounts in collection or a change of address. Knowing when these changes occur is beneficial, but do you really need to pay a service to do this for you? That depends on whether you are willing to take the time to request and review your credit report every four months or annually. If not, then credit monitoring may be a good option for you.
It is worth noting that the Fair Credit Reporting Act (FCRA) permits you to request a free copy of your credit report from each credit bureau (Equifax, TransUnion and Experian) every twelve months. You can do this by visiting www.annualcreditreport.com. This is the ONLY site endorsed by all three credit bureaus and the FTC. Any other sources simply utilize your annual free request option in exchange for a fee, or, perhaps, their ability to share or sell your information.
Another point to remember about credit monitoring is that not every type of identity theft is reported to a credit bureau. Medical, criminal, government benefits and documents, IRS and social security identity theft do not show up on a credit report. Therefore, they cannot be detected by paid monitoring services.
Which Is Better: A Million Dollar Guarantee or Insurance?
This is another marketing gimmick used to lure you into buying identity theft services. This substantial guarantee does not ensure you will not become a victim. The million dollars, in most cases, is the limit of the company’s own identity theft insurance policy. This is not an insurance policy for you. Rather, it is a policy that is owned by the company and may be used to reimburse them to assist you with restoring your identity.
Did you know that you can buy your own identity theft insurance policy? A few years ago, identity theft insurance riders were attached to many homeowner’s insurance policies. If you own your home, contact your insurance agent and ask if you have an identity theft rider on your policy. If you do not have one or do not own your home, ask your agent about the policies they may offer. Some plans may be as low as $25 per year, and may include a specific amount of funds available to assist with the restoration of your identity.
In my opinion, your best value is to buy an identity theft insurance policy as opposed to credit monitoring. A monitoring service may tell you there is a credit-related problem, but it does nothing to resolve it. Identity theft insurance helps you during the ensuing restoration phase, which is far more difficult and time consuming than watching your accounts for fraudulent activity.
But what if you want a service that offers both? Proceed with caution. Many companies claim to offer restoration assistance or services, but in most cases, you end up doing the majority of the work yourself. The average victim spends between 200 and 300 hours attempting to restore their identity.
Before choosing a service, there is only one question to ask: “If I become a victim, who does the work to restore my identity?” The company may state that they offer a hotline staffed with trained professionals. That sounds great, but who ends up doing the actual legwork? To help make this distinction, see if you need to sign a power of attorney document (POA) when you enroll. If the company does the restoration work on your behalf, you will be required to sign a limited POA. If the company does not require one, then you will be doing all of the work.
The Bottom Line
When considering any of these services, contemplate the following first:
- Do you want/are you able to self-monitor or outsource it to a company?
- Do you already have an identity theft insurance policy?
- Do you understand that these services do not prevent identity theft?
- Do you want to spend the time restoring your identity or outsource it to a company?
- Does the company manage the restoration work on your behalf or merely guide you through the process?
If you are a hands-on type of person, then you may decide that identity theft insurance is enough for you. If you know that you will not (or cannot) diligently monitor your credit reports, then you may decide that credit monitoring is a valuable service. The choice is yours. At least now you will be able to read between the lines and see through all the marketing hype in order to make an informed decision.