Does it pay to monitor your identity & credit?

Incidents of identity theft are on the rise.  According to the Federal Trade Commission, approximately 19 people fall victim to identity theft every minute with nearly 9.9 million occurrences each year.  In fact, it is estimated that damages may top $16 billion in 2015.  Unfortunately, it takes the average victim an estimated $500 and 30 hours to resolve each identity theft crime.  With data breaches and cyber-attacks becoming more common in the last few years at major retailers, insurance companies and even a few banks, companies have been trying to step up their game in order to protect their customers.

Despite their efforts, it may be likely that sensitive data breaches could continue to occur.  When data has been compromised, companies often offer up free credit monitoring services for a period of time (usually 12-18 months) as a way for consumers to be on the look-out for suspicious activity.  The problem is that simply monitoring credit may not necessarily be comprehensive enough - the equivalent of closing the barn door after the horse has bolted.  However, there are benefits to monitoring your credit or combining this service with other more comprehensive identity protections services in an attempt to safeguard you and your family.

Why might you need to monitor your credit

Keeping a close eye on your credit rating is critical whether or not you are concerned about identity theft.  Remember, your credit score is your financial reputation rolled into one number and will impact everything from financing mortgages and loans to obtaining employment.  Your credit score matters and should be reviewed and evaluated at least annually to ensure that there are no inaccuracies on your report.  Protecting and improving your credit score can result in significant interest savings over time.

If you have been exposed to a breach or are concerned that you are at higher risk of having your data compromised, using a company to pro-actively monitor your credit can be helpful.

How they can help

Basic credit monitoring services do just that – they monitor your credit.  You can generally expect notifications if there are any changes to your credit report including the ability to verify credit inquiries.  The most basic service will provide data (from one of the three credit bureaus) for certain activities including new account openings and changes of address that may or may not indicate incidents of fraud.

For consumers interested in additional measures, comprehensive identity protection may be more advantageous and technology has steadily improved services.  According to Joe Vacca, Chief Marketing Officer at Identity Guard, an identity theft protection and credit monitoring service, "Identity protection services have evolved to include preventative services – these are tools and educational content that allow you to be proactive in preventing yourself from being a victim.  Not only do customers receive real time text messages within minutes of applications for a credit card or cell phone, we provide applications including VPN, password hygiene and anti-key logging software that can help protect consumers."  It is also important for consumers to understand it is not just about credit - more comprehensive services can also monitor public records and the black market as well.

Joe Vacca states "Black market monitoring is the process of scouring the internet to see if your personal information is available in a non-secure manner.  It doesn't mean it's being used for fraud but it does mean it is not being used securely.  It's a new world and credit monitoring has evolved into comprehensive identity protection."

What are the costs and limitations?

Costs will vary greatly depending on how comprehensive the service is.  From free services for basic credit monitoring to monthly fees of $24.95+ for identity protection, consumers have many options to consider. Credit monitoring and identity protection do have their limitations though and both require the consumer to take an active role when using the services. Reviewing alerts and flagged items on a regular basis are critical to getting the most out of it.

What to do if you have been exposed

So what should you do if you get the dreaded letter notifying you that your data was compromised?  First, if it is an online breach, consider changing all passwords and securing your computers/devices.  Next, be skeptical of all offers.  After a breach, criminals often pretend to be the company involved in the breach, utilize phishing techniques to get additional personal data including credit cards, social security numbers or bank accounts.  Bottom line – if your data has been compromised it may be a good idea to monitor your records with the help of a service as it may alert you to any additional abuses.

Identity theft and cybercrime continues to evolve with changes in technology.  While there is no way to safeguard yourself completely, taking a pro-active approach to monitoring and protecting your personal data may help you to prevent fraud from going too far.  Consider visiting the Federal Trade Commission at www.consumer.ftc.gov/features/feature-0014-identity-theft for more information.  Since identity theft is complex, consider speaking to your legal adviser in the event you are impacted.

Kurt J. Rossi, MBA is a Certified Financial Planner Practitioner & Wealth Advisor.  He can be reached for questions at 732-280-7550, kurt.rossi@Independentwm.com, www.Independentwm.com, and www.bringyourfinancestolife.com - LPL Financial Member FINRA/SIPC.