It's highly probable that, at this very moment, thieves are living large on my good name and diligent bill-payment history -- buying high-definition TVs, stacks of silk suits, and beachfront properties.
On the other hand, there's a really good chance that, having been thwarted by the Fort Knox built around my credit file, no one gives one whit about my pristine credit score (save my mother and future mortgage lender).
Your feelings on identity theft -- denial, fear, anger, acceptance -- depend a lot on whose statistics you believe. The Federal Trade Commission says ID theft complaints nearly doubled in 2002 to a mildly menacing 162,000. The U.S. Postal Service estimates that there were more than half a million victims in 2001 alone. Others claim that nearly one million identities have been compromised.
Regardless of the true number, credit reporting agencies are getting a lot of press from the recent spate of high-profile identity thefts. And what are credit reporting agencies and their clients doing to safeguard the secrets of our borrowing ways? Apparently, plenty. But in order for us to see for ourselves, we have to pay them.
On one hand, credit reporting agencies want to assure the public that their data is safe with them. On the other hand, the path to profits is paved with paranoia. The sale of credit information -- including individual credit reports, combined reports, FICO scores, monitoring services, and now other credit-based scores used by insurance companies -- directly to consumers could be a billion-dollar industry by 2005, up from $600 million this year, according to a report in USA Today.
The good news is that we're more aware than ever of the threat of identity theft. According to a recent survey by FindLaw.com, most Americans take steps to protect themselves from the crime. The study found that 88% of us review bank/credit card statements for fraud, 77% shred/destroy credit card receipts or other financial documents, and 51% never give out Social Security numbers. And get this: A whopping 64% of us order our credit reports as a measure against identity theft.
Clearly, there's a built-in consumer base for these products. The credit reporting agencies track highly sensitive credit information for millions of us. If you've ever applied for a store credit card or had a utility bill in your name, they've got your number. Your credit report shows how many lines of credit you have, whether you're using them, how vigilant you are in paying your bills on time, how often you shop for new lines of cash, and whether that vet bill from 1997 has been resolved one way or another. In fact, FICO scores are consulted in more than 75% of all mortgage applications.
Don't get me wrong, I understand that it's through quick access to this sensitive information that we get mortgages, instant credit approval, and the occasional ego boost when we check our FICO score on a good day. I accept that a credit check is required for me to qualify for six-months' interest-free financing on a buttery-soft leather chair or comparison shop for the lowest mortgage rates. Credit's growing importance is why we made July "Cash In On Credit Month."
The price of fear
To take advantage of the conveniences credit reporting offers, and at the same time make sure infidels haven't corrupted our credit, you decide how far you are willing to go to protect your good name:
- Start by purchasing a copy of your credit report from one of the major reporting agencies -- Equifax, Experian, or TransUnion -- for anywhere from $7 to $10. (Or you can hope that lawmakers eyeing the Fair Credit Reporting Act right now get approval for an amendment that would provide for free yearly credit reports.)
- Since these agencies operate independently of one another, the information they have on you may not be identical. For a complete picture of your credit goings on, you need to get reports from at least the three major credit bureaus. The industry has introduced some convenient products that enable you to purchase an all-inclusive credit report that lays out the goods on you from all agencies side by side. With this month's Fool special on a 3-in-1 credit report (a really sweet deal), that'll run you $30.
- You might not want to stop there. For a true measure of your creditworthiness and whether any dings from the past still matter to the lending world, you'll need to eyeball your FICO score -- your overall credit GPA. That'll be an additional $5 to $10. And perhaps you're curious about how you stack up in the eyes of auto ($12.95-$14.95) and homeowner ($12.95) insurers.
- If you've spotted some recent inconsistencies, or have engaged in high-risk credit behavior (like bandying about your Social Security number at bars), you might want to keep an eye on things and subscribe to a credit monitoring system that will alert you whenever there's activity in your file -- by you or the bad guys. But be aware that the $70-$80 tracking service will only alert you to breaches that occur at the agency from which you order the product. If you really want to cover your bases, you'd better be prepared to pay three times that to keep tabs on your file at all three major reporting agencies.
- For insurance -- actual insurance -- against ID theft, you can buy a policy that offers some monetary protections. Identity Theft insurance is the industry's fastest growing product. Just add it to your homeowners policy for another $25 to $125 smackaroos.
- Should you find that the bad guys have indeed gotten to your file, here's another list of things you need to do -- including alerting the police, closing accounts, putting fraud alerts on your credit files and contacting the Social Security Administration -- to contain the damage.
If you think about the amount of information the credit industry as a whole handles every day, and the growing number of businesses that seek this information to decide whether to do business with you -- banks, retailers, property managers, utility companies, cell phone plan providers, and insurers -- they do a pretty decent job at keeping our data straight and secure. Two million credit reports are ordered each day, and two billion pieces of information are added to these credit files each month. The average consumer's credit report is updated five times a day. Not surprisingly, mistakes happen.
As it stands now, though, individuals are made to feel like the industry's modus operandi is "Borrower, beware." We've become so attuned to the dangers of ID theft that once our credit information is out there, we know that the only sure protection is to keep close tabs on all credit activity in our names.
Should you fall short in your security duties and become a victim of fraud or theft, the industry has put in stop-loss protection, and you'll only be responsible for $50, at most, for a crook's shopping spree. But ask anyone who has had to deal with ID theft, and they'll tell you that there's no recompense for the months spent dealing with credit agencies, financial institutions, and police departments -- writing letters, making phone calls, and collecting evidence to repair the damage done to their good name.
If I were to make my wish list of how this industry could improve, it would include reforms at businesses who require sensitive information to process paperwork, harsher punishment for fraudsters, and more proactive measures at the credit bureaus that compile, distribute, and profit from our credit information.
Companies -- not just credit bureaus, but any business that asks you for your Social Security number -- who suffer breaches of security should be subject to fines and be required by law to notify anyone whose information might have been compromised. There should be harsher prosecution of offenders; especially inside hackers like the one Joel Albert encountered who sold his credit line for a song to his buddies in the Bronx.
Access to marketers and mothers-in-law should be strictly monitored. And businesses should stop using Social Security numbers for identification. Urge your employer, congressman, and dog walker to take it off our driver's license, insurance cards, and delete it from the mail they send to us.
There are pending bills in Congress that address some of these issues and make it a lot easier for identity theft victims to clear their names.
But as it stands, your first line of defense is credit self-awareness.
Dayana Yochim , the author of Couples & Cash: How to Handle Money with Your Honey , double locks her door at night, has a big dog, and checks her credit card bill against receipts every month. This article originally ran on March 25, but was updated to reflect current industry goings-on.