Protect Your Credit from Identity Thieves

You are not the only one who can ruin your credit score. Just as you have to be proactive about raising it, you also have to on top of guarding it, because it can take years to erase the damage done by identity theft.

To mitigate the risk of identity theft, John Ulzheimer suggested shredding any documents that include your name, address and any other non-public information such as old checks, bank statements, brokerage statements, tax returns, 1099s, credit card bills and old insurance policies.

If you do want to take advantage of a credit-monitoring service, Ulzheimer recommended using one that monitors all three of your credit reports every business day and make sure it will notify you immediately if something suspicious occurs. There are services that will do that for about $150 per year.

But if it’s too late, and someone already stole your identity and ruined your score, there are things you can do to clear your name. The credit agencies will consider you guilty until you can prove yourself innocent. Cancel any credit cards that have been stolen, then contact the agencies and ask for a fraud alert (they will share this with the other agencies). Then you must file a police report, which separates the "real deal" victims from the frauds. Initiate a credit freeze, which takes your credit reports out of the system and prevents any new lender from pulling your reports.

Finally, there is the option of identity theft insurance, which typically promises to reimburse you for any time spent dealing with data theft. This should be a last resort, Ulzheimer said, because it's expensive. Always read the fine print, as some policies make it difficult to recover any money and beware a family exclusion clause. Sad as it is, approximately 40% of identity theft is caused by a family member.