For better or worse, your lifetime is occurring in a transitional period when relics like credit scores and social security numbers are still with us. Though they make less and less sense in the internet (post-privacy) age and are routinely abused by companies, they’re not going anywhere anytime soon.
Companies are going to continue
- asking for social security numbers on forms when it’s really not that necessary,
- storing paperwork with social security numbers using less than secure means, and
- using social security numbers as a lazy way to create passwords and usernames.
And social security numbers are going to be intercepted and shared all over the world within seconds on a more and more frequent basis.
It wouldn’t be such a big deal if credit scores weren’t used for everything from evaluating one’s ability to pay back a loan to screening employees to setting prices for products that seemingly have no relationship to credit—like auto insurance.
And getting your credit wrecked by a bad guy wouldn’t be such a terrible thing if it wasn't such a multi-month project to undo the damage. Or if debt collectors didn’t unlawfully harass innocent people as a business practice.
But that’s our world. Today. And we have to deal with it.
Credit monitoring? I'll pass.
I think credit monitoring services and identity theft insurance are both a waste of money for at least two good reasons.
First of all, and most importantly, monitoring and insurance are reactive measures. They do nothing to stop someone from using your identity illegally in the first place.
Second, most of these services don’t really help you that much once your identity has been stolen. It’s still on you to clean up the mess and make countless phone calls. And it's still your problem when the damage resurfaces months or years later.
The least bad solution
A few years ago, I took some sage advice and put a freeze on my credit. In my mind, there is no better identity theft protection available. If your credit is frozen, your social security number and identity are useless to anyone trying to open an account in your name. That’s because the financial institution won’t be able to look at your credit file. No credit check, no loan.
If you want to open an account yourself, you'll need to thaw (unfreeze) your credit. It's not nearly as hard as you might think either. For each of the three major credit agencies, you’ll need to provide a PIN if you want to thaw. I keep mine in 1Password so they’re easy to retrieve wherever I am. Be sure to keep them somewhere secure, though.
Since I first froze my credit, I’ve opened new credit cards, refinanced my home, and done several other things that required credit checks. In each case, I simply went to the appropriate credit agency’s web site (e.g. Transunion) filled out a short form, and within a few minutes, my credit was thawed.
You can even specify how long you want your credit to remain thawed (e.g. one week). After that period, your credit will re-freeze with no additional action on your part.
Unlike credit monitoring services that charge you a recurring monthly fee, freezing your credit only costs something when you want to freeze or thaw. Often, it’s as little as $3-$5. In some states, it’s totally free.
If you want a cheap and highly effective way to prevent someone from whomping your precious credit score, check out the credit freeze rules for your state.