Freezing Your Credit Report is Not a Cure-All

Last week's Wall Street Journal published an article titled, "More People Are Freezing Credit Reports:"

"Spooked by the possibility of identity theft, increasing numbers of people are taking a radical approach to thwart criminals: They are putting their credit reports on permanent freeze.... An estimated 50,000 to 70,000 people have so far signed up for credit freezes, according to the Consumer Data Industry Association, a trade group that includes the three credit bureaus."

According to its web site, the Consumer Data Industry Association is:

"an international trade association, founded in 1906, that represents consumer information companies that provide fraud prevention and risk management products, credit and mortgage reports, tenant and employment screening services, check fraud and verification services, and collection services."

While it's good to see more consumers taking an active interest in protecting their identity and personal data, the prevailing consumer attitude about identity theft seems to be:

"Michael Dana, a Dallas police detective, chose to freeze his credit reports after a Texas law took effect last month that made freezes available to all residents. Mr. Dana says he received several notices from financial institutions and the government saying that some of his personal information may have been compromised."

"Scott Marberblatt of Swampscott, Mass., says he uses several credit-monitoring services to alert him to potential identity theft. But the 46-year-old small-business owner says he plans to drop some of these services, thereby saving "a decent amount of money," and instead freeze his credit after the option becomes available at all three bureaus next month."

While this attitude is understandable, it is important to realized the limitations of a Credit Report Freeze (also called a Security Freeze in many states). Freezing your credit report is not a cure-all or "silver bullet" against all types of identity theft. While freezing your credit report will protect you against new account fraud (e.g., where an identity thief takes out a loan or a mortgage in your name), it won't protect you against:

• Identity fraud during a crime: where the criminal presents your identity to police instead of theirs (Note: criminals can use your stolen personal data this way in any country, not just in the USA)
• Identity fraud: where an identity thief tries to access your existing financial and bank accounts by pretending to be you (e.g., calling the banks customer service number to change your online passwords)
• Medical fraud: where an identity thief assumes your identity to get medical care they otherwise aren't entitled to
• Insurance fraud: C.L.U.E. insurance reports with your personal data are still freely sold by firms like Choicepoint
• Identity fraud: where an identity thief tries to steal your snail-mail sending a change of address form to the post office, since many consumers receive pre-screened credit offers via snail-mail (opt-out today!)
• Identity fraud from dumpster divers: you still have to shred documents with your sensitive data before disposing paper in the trash or recycle bins
• Your employer, prior employer, or retail firm has poor data security which results in a data breach that exposes more of your personal data to identity thieves, beyond what has already been exposed
• You shop at a retailer, who has hired a subcontractor for offshore outsourcing, and that subcontractor has a data breach which exposes your personal data in that country

Want to learn more? Click on any of the above links.