Thwart ID thieves

(Money Magazine) -- There's no surefire way to stop ID theft because so much of your information is already out there. More than 93 million personal data records have been lost or stolen since February 2005. That's on top of the tens of millions of records bought and sold annually by credit issuers, insurers, government agencies, data brokers and, of course, identity thieves.

Your info is easily accessible to hackers and company insiders who can profit by selling it on an online black market that didn't even exist five years ago, says Dan Clements, CEO of CardCops, which monitors the online trade in stolen information.

And a little data, especially your credit-card information combined with your Social Security number, goes a long way. Thieves can open accounts and borrow money in your name or even establish a new life as you, complete with job, home and claims on your Social Security benefits.

But here's the thing: The most common form of ID theft, charging purchases on your credit card, costs you nothing and is almost always easy to fix. New-account fraud, which is more problematic, affected a mere 1.5% of adult Americans last year.

The really scary stuff - someone living your life - hardly ever happens. "It's possible, but there's no reason to lose sleep over it," says Jay Foley, co-executive director of the nonprofit Identity Theft Resource Center.

Most "identity theft protection services" are a waste of money. Even the best are limited in what they can do. Credit monitoring services, for example, can neither tell you if someone is using your Social Security number to get a driver's license nor prevent ID theft. They just alert you sometime after the crime occurs, says Avivah Litan, a security and privacy analyst at Gartner.

Money Magazine asked seven identity theft experts what they do to protect themselves. After all, these folks know how to separate the hype from the reality.

Their most important steps:

Get three free credit reports a year. You're entitled to a free credit report once a year from each of the major credit bureaus. Order one every four months by going to annualcreditreport.com or calling 877-322-8228. You can get another set of free reports if you call any one of the major bureaus and request that it place a 90-day fraud alert on your file. The alert tells lenders that are checking your report that they must call you before they extend credit in your name.

Monitor online banking and brokerage accounts a few times a week. Then check your credit-card statement every month. For example, if you see a $1 debit-card charge from the Red Cross, that could indicate a thief is testing your debit-card information, Clements says.

Use cash or a credit card, not a debit card, when practical. Neither cash nor a credit card leaves any trace of your bank account information. And making more charges on your credit card isn't likely to increase your risk of ID theft since your card info is already recorded every place you do business.

Opt out. Tell banks, insurance companies and brokerages that you don't want your financial information and credit status shared with anyone. Companies must send you opt-out privacy notices, which offer a toll-free number to call or an address where you can send a written request. Also, call the three major credit bureaus' toll-free line (888-567-8688) to opt out of prescreened offers of credit and insurance.

Don't share. Leave your Social Security card at home, and don't offer your number to anyone unless it's for tax, employment or credit purposes (including the opt-out option described above). Shred financial documents you no longer need. And lock your mailbox.

Don't fall for phishers. Ignore phone or e-mail solicitations or "security checks" from institutions you do business with unless you initiated the exchange. Your bank isn't sending you an e-mail asking for your account number. That's a crook hoping you volunteer information that he can make a buck on by ripping you off directly or by selling your data. Don't open suspicious-looking e-mails.

Guard against pretexting. If you are worried that an employer, an ex or a debt collector might try to get records of your financial or phone accounts, tell companies to use a randomly assigned number as an identifier for you, not your Social Security number, or to require three to four identifiers. Also, create online versions of those accounts right away so that someone else pretending to be you won't be able to do it. Use complicated passwords.

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More from the Complete Layman's Guide to Cyber Safety:

Defend your computer: Some pretty bad folks are trying to break into your (virtual) home all the time. But you can make it a lot harder for them.

Guard Privacy at Work: Everything your do at the office is an open book. Understand that and you can save yourself embarrassment. Or worse.

Keep Your Kids Safe: Your parents worried that you watched too much TV. They never had to deal with IMs and MySpace.