How to monitor your credit for free
86% of all identity theft in 2014 was account takeover. In an account takeover, a fraudster takes control of an existing bank account or credit card and starts spending. So long as you report the fraud promptly to your bank or credit card company, your liability is limited. On credit cards, your maximum legal liability is $50, but many credit cards offer $0 fraud liability as a product benefit.
To protect yourself against account takeover, you need to monitor your transactions closely and report any suspicious transactions immediately.
Fortunately, there are tools that can help notify you right away if there is a suspicious transaction on your account. Most banks and credit card companies will let you set up text or email alerts. The service is usually free, and you can usually decide when and how you want to be notified. You can learn how to set up text message alerts with most major banks here.
If you don't sign up for alerts, make sure you read your statement every month. Pay close attention to any credit cards that you don't use and make sure you read any electronic statements that you receive. And make sure you call your bank as soon as you see a suspicious transaction.
Credit Report Monitoring
The most serious type of fraud is identity takeover. With identity takeover, someone steals your personal information, including your Social Security Number. The thief will then open a new account in your name. The best way to see if someone is opening an account in your name is to monitor your credit report. There are a few ways to do it.
First, everyone is entitled to a free credit report from all three credit reporting agencies once a year. You can get your reports at AnnualCreditReport.com. If you discover that you have been a victim of identity theft, you will need to take a number of steps, including filling a police report. The government has created an excellent resource, IdentityTheft.gov, which should be your first stop. On this site, you will be able to create a recovery plan. But be prepared: it can take hours, days or even months until everything is resolved. The biggest cost to most identity theft victims is stress and time. Although the law protects your liability, it does not protect the amount of time it takes to ensure you have no liability.
Checking your credit report once a year is good, but you should really monitor your report more often. CreditKarma, which is famous for its credit scores, also offers free credit monitoring with TransUnion. By monitoring your TransUnion report daily, you will greatly increase the likelihood of discovering identity theft as soon as it happens. The earlier you find out about the theft and deal with it, the less time it will take you to recover.
If you want to monitor all three credit reports daily, you will need to pay. You can use a site like MagnifyMoney to compare the best solutions that charge a fee. For example, ProsperDaily charges $9.99 a month. With that fee, you are able to monitor all three bureaus daily and receive resolution services, which is explained below.
Anyone who has suffered identity takeover understands how complicated the resolution process can become. Depending upon how many fraudulent accounts were opened in your name, it can take a very long time navigating multiple bureaucratic mazes to get your situation resolved. So long as you report identity theft, your legal liability is limited. However, you could be forced to spend hours dealing with banks, credit card companies, police departments and more to get the situation handled. The best resolution services provide you with a dedicated case worker. Typically, you will sign a power of attorney which enables the company to do all of the work on your behalf. Think of it as an insurance policy on your time. Although challenging, you could probably do all of this yourself. But if you don't want to spend the time, paying for a service could make a lot of sense.