An early identity theft warning

Another day, another data breach. In the decade since the Identity Theft Resource Center has been tracking security breaches, it has counted over 5,300 breaches. Every two seconds, another American becomes a victim of identity fraud.

Often the first clue that personal information—such as your Social Security number, driver's license number, or credit card numbers—may have been stolen comes when you start getting billed for items you never bought or discover that your credit score has tanked. 

For more information, read "Should you freeze your credit file?"

Senator Charles Schumer (D., NY) would like to change that by having the firms that control consumers' credit reports sound an alarm much earlier. Last month, Schumer sent a letter to Equifax, Experian and TransUnion, the country's three largest credit-reporting firms, asking them to implement a system that will notify consumers when someone is using their name to try to get a loan or other type of credit.

"I'm urging the three national credit reporting bureaus to set up a simple, easily-accessible voluntary system that would notify consumers anytime their credit is checked or accessed to open a new account or establish a line of credit to buy a car, rent a home, or worse," said Schumer. A ‘credit inquiry alert' would instantly notify consumers—by phone or by email— every time there is an authorized or unauthorized query on their credit file."

If the consumer didn't request the credit, they would know that their information had been compromised. Schumer also suggested that consumers who are sent alerts should be allowed to immediately freeze their credit reports, which prevents new accounts from being opened in your name or loans being given out.

"Too many people have faced the reality of learning that someone else has opened new lines of credit in their names only once their score has already been run into the ground," he wrote in the letter.

While consumers can currently request a freeze on their credit reports, they often don't do this until it's too late. Schumer's proposal would allow them to do this immediately as part of the alert. (You have to lift the freeze before applying for further credit.)

If you suspect you may be a victim of a data breach, follow these steps to protect yourself:

• Request a fraud alert. Equifax, Experian and TransUnion all allow consumers to request fraud alerts on their credit reports at no cost. These require lenders to take additional steps in verifying the identity of the person applying for credit in your name before approving them. The period for which the fraud alerts are in place varies, but is usually 90 days for most consumers.
• Sign up for a credit-monitoring service. For a fee – generally between $18 and $30 a month – the credit-reporting firms will notify consumers when their credit reports are being checked for a loan application. Schumer proposes that the notification be free and in place for as long as the consumer wants it.
• Freeze your credit report. A freeze is worth considering if you suspect someone has stolen or otherwise obtained your Social Security number or other information that can be used to open credit in your name. But a security freeze may not be the best solution if the theft involves only your credit or debit card information. While it's in place, it prevents virtually everyone from accessing your credit files, even those you've authorized to do so (access still is permitted for companies with which you have existing relationships, such as your credit card issuers). That can create hassles, delays, and other problems if you need to apply for a loan, credit card, or a job; obtain insurance; rent an apartment; set up electric or phone service; and more. And it will cost you between $2 to $15 to set up and remove a freeze.

With data breaches occurring daily, consumers need better ways to protect themselves from identity theft. Schumer's proposal is a big step in the right direction. 

— Catherine Fredman