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On money

Insuring ID, credit can get expensive

By HELEN HUNTLEY
Published September 18, 2005

Fear of identity theft is creating a whole new market for credit monitoring and identity theft insurance.

There's no question that identity theft is a serious problem affecting more people every year. The question is whether the services being touted are worth the price.

None of them prevent identity theft and all of them have major limitations. Take credit monitoring, for example. The promise is that you'll be alerted when a thief opens a new account in your name or records a new address for your name. The reality is that the alert could come weeks or months after that happens, if at all.

Many creditors report to bureaus once a month or once a quarter and some may not report until an account is in collections.

In addition, many creditors report to only one of the three major credit bureaus and most monitoring services monitor only one bureau. The lowest price I found for three-bureau monitoring was $139 a year (double that if you are married and want both files monitored).

As these services proliferate, prices are dropping, but they still aren't cheap enough for me. The free alternative in the meantime is ordering a report from one credit bureau every four months, which means checking on each of the three bureaus once a year.

Reports are available online (www.annualcreditreport.com) by calling toll-free 1-877-322-8228 or by writing Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA, 30348-5281 (be sure to include your Social Security number and birth date and specify which bureau's report you want.)

Identity theft insurance also has limitations. Normally it does not cover any financial losses, but merely reimburses expenses incurred clearing things up. You still have to do all the work. The cost of a typical identity theft policy is $25 to $50 a year for $15,000 to $25,000 of coverage. Some companies sell it as a rider to homeowners' insurance, but most often it is a separate policy. More expensive versions, which may be billed as "protection" or "restoration" service, may perform services such as disputing fraudulent charges.

Careful reading of policy exclusions is a must, says the Institute of Consumer Financial Education. Some things may not be covered, such as identity theft committed by relatives or the costs incurred clearing up erroneous liens and criminal records. Also check the size of the deductible, if there is one.

Fortunately, there are things you can do for free to make identity theft less likely: Safeguard or shred credit card receipts, bank statements and pay stubs. Use a locked mailbox. Refuse to give your Social Security number or birth date to people who don't legitimately need them. Leave your Social Security card and extra credit cards at home. Review bank and credit card statements as soon as they arrive.

You also might want to reduce the mail you get that might need shredding. You can cut back the offers you receive for credit card and insurance by going to www.optoutprescreen.com or calling toll-free 888-567-8688. Get off other junk mail lists by writing Mail Preference Service, P.O. Box 643, Carmel, NY, 10512 include your name, address and signature. These steps will reduce, but not eliminate, solicitations.

I can never remember from year to year how withholding exemptions work. If I prefer to receive a larger tax refund, do I claim myself? I am single and have no children.

Each exemption you claim reduces the amount withheld from your paycheck. If you want more withheld, don't claim any exemptions. Of course having more money withheld than you owe is the same as making an interest-free loan to the government. Why not have the extra money deposited into your credit union or other savings account each pay period instead?

Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

[Last modified September 16, 2005, 18:52:01]