Color of Money: Protecting Credit from Thieves Consumers in the United States can now put a much stronger lock on their credit reports. Financial guru Michelle Singletary discusses how the new security freeze can help protect against identity theft.

Color of Money: Protecting Credit from Thieves

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According to Javelin Strategy and Research, more than eight million people were victims of identity theft in 2007. Now, here's the good news. That's actually down a little from the previous year, in part because of new ways to protect your private information.

Here to talk about one new way to avoid identify fraud is DAY TO DAY's personal finance contributor Michelle Singletary.

Michelle, welcome back to the show, and what is the best way now to protect your identity?

MICHELLE SINGLETARY: Actually in the fall, Experian, Equifax and TransUnion, which are three major credit bureaus, began offering consumers nationwide the option of freezing their credit reports. Now, until then if you wanted to freeze your credit report - or reports, I should say - you had to live in a state where the practice was allowed.

CHADWICK: And why would you want to freeze your credit report if you discover that indeed someone has stolen your identity?

SINGLETARY: Well, in the past, if you were the victim of identity theft, they would recommend that you put a fraud alert on your credit reports. And basically, a fraud alert lets lenders know that you are either the victim of identify theft or could be. But there's no guarantee that they still wouldn't extend credit to the criminal.

Well, a security freeze essentially locks down your credit reports, and so no lender or creditor can get access to your credit reports without your permission. And this includes your credit scores. So without access to your credit reports or your credit scores, it's highly unlikely that they would extend credit to someone who's trying to commit identity theft on you.

CHADWICK: Because what you're really saying is you're trying to protect yourself from not just losing the money that might be in your credit cards, but this thief might open up a new credit line for you and steal money from that, from an account you don't even know about.

SINGLETARY: That's right. Identity theft can open up new accounts. They can hijack your existing accounts. I've known identity thieves to get a car in someone's name, a house in someone's name, and actually commit crimes. So this can get pretty bad for some folks.

CHADWICK: So explain to me again. How do you put a security freeze on your account?

SINGLETARY: You have to send a certified letter to each of the three major credit bureaus. And when you apply for the freeze, they're going to give you a pin number or a password that you will use to lift the freeze when you need to. Now, some people are a little afraid of sending that kind of information through the mail, because you're going to have to send your name, you Social Security number, perhaps, you know, your address and some other personal information. So that's why you want to send it certified with receipt return. So you want to be sure someone signs for it so that you know it got into the hands of someone at the credit bureau.

CHADWICK: Well, what does that security freeze then do if you actually want credit?

SINGLETARY: One of the disadvantages is that you can't get instant credit because you have to remove the freeze before they can look at your files. So if you're in the market for a car loan or a home loan or any credit, you're going to have to plan it so that you can remove the freeze on all your reports in time to apply for that loan.

CHADWICK: Good advice from Michelle Singletary. She's our regular expert on personal finance. She writes the nationally syndicated column The Color of Money.

Michelle, thank you again.

SINGLETARY: You're welcome.

CHADWICK: And you can hear more from Michelle. Just go online to - all one word.

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