How to Do What Identity Theft Protection Companies Do...for FREE

By G.E. Miller on 24 August 2010 (Updated 22 August 2011) 1 comment
Photo: taberandrew

Protecting and monitoring identity theft has become a big business. Simply Google "identity theft protection" and you'll find dozens of business outfits offering to protect your all too important identity for a measly $10, $12, or $20 per month. (See also: How to Prevent Identity Theft)

What will they protect? Sometimes, that is not clear. Dig a little deeper and you'll find that each of them tend to have similar claims as to how your identity will be blanketed with protection if you subscribe to their service.

What you may not know (and they probably don't want you to know), is that you have the power to do what they can. "And how much will it cost me?" you may ask. Nada!

Let's go through each of benefits that these identity theft protection companies typically offer you and highlight how you can do the same for free with little effort required.

Benefit #1: Free credit reports

Credit reports are an important way to see if any accounts have been opened in your name or credit inquiries have been made on your social security number. The identity protection companies will send you these as part of your service.

Free Alternative: You can get three free credit reports annually from the U.S. government-backed annualcreditreport.com.

Benefit #2: Free credit fraud protection alerts to all 3 credit bureaus

You can add a fraud alert message to your credit report to help protect your credit information. Fraud alert messages notify potential credit grantors to verify your identification before extending credit in your name in case someone is using your information without your consent.

Free Alternative: You can do this for free every 90 days. You simply do it with one of the three credit bureaus, and they alert the other two. Here's the link to Experian's fraud alert.

Benefit #3: Removal from junk mail lists

With less junk mail, there is less opportunity for your identity to be stolen via mail fraud.

Free Alternative: You can do this for free at optoutprescreen.com.

Benefit #4: Stolen wallet or purse protection services

The ID theft companies claim they will work with your card providers to ensure your cards aren't being used.

Free Alternative: Make a photocopy of the backs of all your cards and call the companies yourself if your wallet or purse is stolen. The odds are you will do this immediately anyway, versus waiting around for a third party to do it for you.

Benefit #5: Credit score monitoring

Some (not all) identity protection companies offer credit score monitoring. The ones that do are usually higher priced.

Free Alternative: There is no free solution to credit score monitoring. Some companies may offer you a free credit score, but you usually end up paying a monthly subscription shortly after if you don't cancel their service. The thing is, you don't really need monthly credit score monitoring. You really only need to know your credit score in anticipation of a big credit event, i.e., taking out a mortgage on a house or loan on a car. If you are paying for this every month, you are wasting money.

Benefit #6: $1 million insurance against identity theft losses

Free Alternative: It has been debated whether or not ID theft companies really back up this promise. One thought is that they know if you do all of the above, it's rare that you will ever see identity theft losses. Another thought is that their disclaimers are so heavy that they would never pay for actual losses (and there are class action lawsuits out there that add substance to this claim).

All you need to use all of the above methods is a calendar to keep track of when you should be doing them.

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"There is no free solution to credit score monitoring."

Credit Karma ain't bad. It's the Transunion score instead of the FICO score, but pretty close.