Identity theft continues to be the fastest growing crime in the country.  There are many types of identity theft, but one of the worst is when someone uses your personal information to borrow money or establish credit. 

Sadly, the 3 major credit bureaus, Equifax, Experian and TransUnion, have done little to help us prevent identity theft before it happens.  In fact, they make money by selling services that inform you if someone has accessed your credit file...after the fact.

But over the last 5 years, 39 states have passed laws that REQUIRE credit bureaus to offer "security freezes" to consumers that prevent access to your credit records.  A crook cannot take out a loan in your name if your file cannot be accessed.  Security freezes go a step further than "fraud alerts" offered by the bureaus that tell the lender to double check your identity.  The main problem with fraud alerts is that no law says the creditor must contact you.

California's security freeze law has been in place since January 2003.  They are free to ID theft victims and $10 per credit bureau for others.  It costs another $10 to "unlock" your account, either temporarily, for a particular creditor, or permanently. 

It takes a little work to set up your security freeze as the bureaus require a written request sent by certified mail.  The State of California provides guidance and sample letters for this purpose (click here for a link to the California Office of Privacy Protection website).  After registering, each credit bureau will send you a confirmation letter with instructions on how to remove the freeze.  Security freeze information is also available on the Experian, TransUnion and Equifax websites by clicking the links in this sentence. 

It may be a pain in the neck to set up a security freeze but there is no better way to stop credit fraud in its tracks.  And if you need credit of your own while on a security freeze (e.g. home refinance, car loan, new credit card), you'll need to remove the freeze beforehand.

You may have seen ads from a company called LifeLock where the CEO shows his Social Security Number on the side of a truck to demonstrate how confident he is that his product prevents ID theft.  For $10/month or $110/year, LifeLock sets and resets fraud alerts at each credit bureau on your behalf every 3 months.  They also offer to pay up to $1 million to fix your ID theft issue if it happens while using their service.  Sounds convenient and definitely better than doing nothing, but it is more expensive and still less effective than a credit freeze. 

Another company, TrustedID, has a product called IDFreeze that does basically the same thing as LifeLock for a similar price of $13/month or $110/year (though at the time of this writing you could call TrustedID and save another $13 if you enrolled over the phone).

TrustedID just launched a feature that goes a step further than LifeLock...after purchasing IDFreeze you can add an additional product called CreditLock, which for another $44.95 (one-time charge) they will perform a security freeze on your behalf (it costs another $39.95 to temporarily remove the freeze).  The TrustedID website gives sparse details on how CreditLock works - you must call them to find out about it.  What I don't understand is, if someone purchases a security freeze, then there would be no need for fraud alerts anymore.  So you end up paying $110/year for something you don't need.  Bottom line...if money is not an issue, you value convenience and want to protect your identity, consider the IDFreeze/CreditLock products from TrustedID.

While LifeLock offers 24/7 customer service (which I tested and it was good), TrustedID is only available during normal business hours, which is a problem for me if I have an ID theft issue on a weekend.

Aside from the above, you should also do the other things we've all read to help reduce ID theft...don't give out personal information, shred personal documents, watch out for scams/phishing, etc.  (click here for the full details on the Federal Trade Commission website).  But if you really want to sleep better at night, consider putting a security freeze on your credit.

Most importantly, don't do nothing!  Take action!