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By Herb Weisbaum ConsumerMan
msnbc.com contributor
updated 10/21/2010 7:42:50 AM ET 2010-10-21T11:42:50

Identity theft is a serious problem. For years now, it’s been at the top of the government’s list of most common scams. This is National Protect Your Identity Week so you’ll be hearing a lot about this crime. But things may not be quite as bad as we’ve been led to believe by news reports and advertisements.

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“People are afraid of identity theft because it’s been hyped up, often by the companies that sell these ID theft security products,” says Jeff Blyskal, a senior editor at Consumer Reports.

The Federal Trade Commission estimates that more than 10 million people were victims of identity fraud last year. According to the latest report from Javelin Strategy and Research, based on a survey of 5,000 adults across the country, identity thieves stole $54 billion dollars in 2009.

While alarming, these numbers may make the problem seem worse than it really is. That’s because the most common form of identity theft is what Blyskal calls “old-fashioned credit card theft or check fraud.” Most people probably wouldn’t consider that identity theft.

In the Javelin survey, 75 percent of those listed as victims of identity fraud had experienced a stolen or misused credit card number. Another 33 percent reported debit card fraud. (These numbers add up to more than one-hundred percent because some people had both credit and debit fraud.)

The scenario most people worry about – and rightly so – is the identity thief who steals their Social Security number and other basic information and pretends to be them.  These crooks can open new accounts, get a driver’s license, rent an apartment or commit crimes in your name. If someone truly hijacks your identity, the repercussions can haunt you for years. Thankfully, this is the least common form of identity fraud. But how would you ever know that?

Credit monitoring to the rescue 
These services promise to protect your identity. But fraud experts say credit monitoring services won’t spot most cases of identity theft, because they only monitor your credit report. And most types of identity fraud don’t show up there.

“Will credit monitoring help you deal with credit card and debit card fraud? Not at all,” says Jay Foley, an ID theft victim who co-founded the Identity Theft Resource Center in San Diego.

“They don’t monitor your banking transactions. They don’t tell you that someone has your driver’s license and is getting traffic tickets or committing other criminal acts in your name. And they have absolutely no ability to know that your card number has been stolen and is being sold on a website in Romania.”

Earlier this year, Consumer Reports looked at two dozen identity theft protection services and found them to have dubious value.

“Most of these products are unnecessary or ineffective or they duplicate things that you can do for yourself for free,” says senior editor Jeff Blyskal.

A few services now provide what’s known as whole life monitoring. Because they check a variety of public records, these companies are more likely to detect a threat to your identity. Jay Foley tells me he likes Debix, ProtectMyID, Identity Guard and InfoArmor.

I suggest you visit a relatively new website called MyIDScore. It’s run by ID Analytics, a San Diego company that uses its massive database to help businesses prevent fraud. Now you can access this same information – for free – and learn how likely it is your identity is being misused. If you are in the danger zone, the site will explain ways you can reduce that risk.

Story: A new tool to fight identity theft

This service is real and the company is legitimate. While you must provide your personal information, such as Social Security number, the company does not capture that information.

How do you protect yourself?
“There is no 100 percent, slam-dunk, guaranteed way to prevent identity theft or the compromise of a credit or debit card,” says Adam Levin of Identity Theft 911. “So you have to mitigate your exposure by doing a number of different things.”

Here’s how to get started:

  • Keep all financial documents in a secure place where no one can get to them. That includes checkbooks in your purse and statements from your bank and broker at home.
  • Shred anything that has account numbers or other identifying information. This would include convenience checks that come with your credit card statement or unsolicited credit card offers that arrive in the mail.
  • Get a locked mailbox. If you pay bills by mail, use a U.S. Postal Service box.
  • Go online to your bank and credit card accounts. Many fraud experts recommend doing this every day or so. Of course, you must have good security software that is automatically updated on a regular basis.
  • Limit the information you post on social websites and think twice before you share account numbers or other personal information with anyone. Make sure they are who they claim to be and that they have a legitimate reason for needing this information.
  • Opt out of unsolicited credit card offers. These can be stolen and filled out in your name. When the card arrives in the mail, the thief will be there to steal it. You can stop most unsolicited credit card offers by going to http://www.optoutprescreen.com/. Note: you will need to provide your Social Security number to use this service which is provided by the credit bureaus. The only way they can identify you if by your SSN. I used the site years ago, and it works.
  • Consider putting a “Security Freeze” on your credit files with the big three credit bureaus. This prevents anyone from opening a new financial account in your name – even you – unless the account is unfrozen. You’ll pay a small fee for this service, but to me this is money well spent. I froze my accounts nearly two years ago. (Read: ConsumerMan freezes his credit files )
  • Get your free annual credit report from Experian, Equifax and TransUnion. Use this site: annualcreditreport.com and only this site. I suggest you request a report from one of the three bureaus every four months. That way, you are getting a look at this information throughout the year.

Security analyst Linda Criddle, who runs the website ilookbothways.com, tells me she is “appalled” at how few people do anything to protect themselves against ID theft.

“They do not check their credit history. They do not freeze their account. They do not even look at their credit card bills very carefully. It’s that kind of financial irresponsibility that I worry the most about,” she says.

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