Do you change your own oil? Most of us are capable of performing this simple maintenance on our vehicles, but we choose not to. After all, it is messy work, requires a few specialized tools, and disposing of used oil can be a hassle. To boot, the cost of an oil change at the local service station, specialty stores like Direct Tire or Pep Boys and even the dealerships is relatively modest.
So what’s the connection with identity theft? Identity theft is a big problem that is affecting more and more people each year. At a minimum, the problem creates a great deal of aggravation and considerable worry. At worst, it can cause debilitating harm to your credit, making it difficult or impossible to buy a car, rent an apartment, refinance your home or even get a job.
To combat this problem, many companies such as LifeLock, TrustedID, IdentityGuard, ID Watchdog and others offer services that they claim are designed to help you prevent, identify and correct any problems that may arise due to identity theft. They claim to do this through a multi-faceted approach that includes removing your name from pre-approved credit card mailing lists, providing annual copies of your credit reports and searching the web for potential indicators that your identity has been compromised. And then when a problem occurs, they provide counseling and guidance on how to repair the damage.
Until recently I was not very much in favor of identity theft protection services. After all, many of the features offered by these services are items that anyone can easily accomplish on their own, just like changing your oil. For instance, under federal law, consumers are entitled to receive a copy of their credit report from each of the three major credit bureaus once each year. Likewise, anyone can sign up at www.optoutprescreen.com to limit unwanted credit and insurance offers. And much of the information needed to repair credit damage is readily available on line (The FTC has extensive information available here). So why then should anyone pay on the order of $100 or so each year when they can do this all for free?
The reality is that we are busy people. Or we’re not perfectly organized. Or we just don’t trust that we are going to dot all the i’s and cross all the t’s. Just as with the convenience of the oil change services, there is clearly a place for these identity protection companies even if all they are doing is something that we can do ourselves.
However, before engaging in such a service, be certain that you know exactly what you are getting and what you are not. For instance, many people may mistakenly think that the “million dollar” guarantees offered by these services will pay them money to cover substantial loss of income or provide other compensation if they are forced to pay higher interest rates on mortgages or car loans due to damaged credit. Read the fine print very carefully – in many cases, they do not make any direct payments to the consumers except possibly to reimburse certain limited expenses. To the extent that any significant money might be paid, it is primarily for lawyers and other professionals who they hire to clear your name. Lost income, if it is covered, is very limited (i.e. only for the time off work spent fixing your identity).
More important, the insurance may not even be available unless you can show that your loss was due to a failure of the service and not some other cause. Identity theft is tricky business and there are many ways that thieves can get hold of your information. The protection services cannot possibly stop all of the leaks, so unless it is their fault that you have a problem, their insurance may not be available to help you fix the problem.
What are you doing to protect your identity? Have you used one of these services? Has it been of any value? Do you have questions about identity theft? Please fill out a comment or send me a note.