All About Credit Cards

Before you begin your holiday shopping, there’s one thing you should strongly consider doing — and it’s not making a list!

Evidence suggests that more people have their identity stolen during the busy shopping season than at any other time of year, and that could be a big, expensive headache.

But, The Early Show money maven Ray Martin explained Thursday, there’s a new way to protect yourself.

It’s called a credit freeze.

Although it’s been available in some states, now everyone in the country can shut down access to his or her credit report, thanks to a move by credit bureaus last week.

A credit freeze, Martin points out, is exactly what it sounds like: It prevents potential new creditors from accessing your credit report without your explicit permission. That means no one can use your name to take out a loan or sign up for a credit card.

Ray says it’s a fabulous idea, and he plans to sign up immediately himself.

He stresses that we’re talking about preventing identity theft here, not preventing credit card fraud. Freezing credit does NOT someone from getting your credit card number and using that information to charge things. However, it WILL stop someone from opening new credit accounts in your name, putting their utility bill in your name, etc.

In general, identity theft is much more serious than credit card fraud. There are express limits in the law on your liability in the event someone uses your credit card number, but no such limits exist for I.D. theft, and you might not even realize your identify has been stolen for long periods of time.

A credit freeze, Martin observes, is like the ultimate lock-box around your precious credit report. However, the freeze also stops you from accessing the report.

Let’s say you walk into a department store, do a lot of holiday shopping and decide to open a store credit account in order to save 10 percent on your purchases. You wouldn’t be able to. You can’t apply for and receive instant credit like that. Instead, you would have to call the credit bureaus beforehand, ask them to lift the freeze, apply for the credit, then have your accounts re-frozen.

There’s the other catch: You must pay each of the three credit bureaus $10 to freeze your credit. You also have to pay to lift the freeze. For a couple, that means $60 to enact the freeze, $60 more if they want to apply for a loan and lift the freeze, then $60 more to reinstate the freeze.

But, if you’ve been a victim of identity theft, it’s all free.

More good news: All states have different rules, so the standard $10 fee doesn’t apply across the country. In some states, the service is offered for free, and others charge only $5.

Regardless of some of the apparent hassles, Martin says everyone should freeze their credit reports before doing any holiday shopping. In particular, he recommends that anyone who has been a victim of identity theft sign up for a credit freeze immediately. That also makes a lot of sense for kids, who are a growing target of I.D. thieves and won’t be applying for credit anytime soon. It could also be a good option for “mature” creditors — adults who don’t plan to apply for a loan anytime soon.

But, Martin notes, even if you do intend to apply for credit soon, you shouldn’t dismiss this new opportunity: The associated fees are small compared to what it will cost you in both time and money to straighten out a stolen identity.

To have your reports frozen initially, you need to send a certified letter to each credit bureau. Check out each bureau’s Web site for details on what needs to be included in the letter. For the most part, they need very basic information, such as your Social Security number, birth date, etc., and a copy of your drivers license and/or utility bill.

A credit freeze is the only thing you can do to stop identity theft before it begins. But, if the credit freeze sounds a little extreme for you and you still want to do something to protect your identity, you have two other options, Martin says.

You can institute a “fraud alert,” a special message you request be placed on your credit report, requiring lenders and merchants to verify your identity before issuing any new credit. This is free, but there’s a chance lenders could ignore the alert. And you could sign up for credit monitoring, and pay a credit bureau $5 to $15 a month to send you an e-mail alerting you to any changes in your credit report. That could alert you to unusual activity, such as a card being opened in your name that you didn’t know about.

by Ray Martin
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