Keeping Your Good Name from Going Bad

Question of the week:My sister was the victim of identity theft and went through months of hassle getting everything straightened out. What are your suggestions for safeguarding your identity? --Ramona

Dear Ramona,

Identity theft--whenever someone uses your personal information such as Social Security, credit card or driver's license numbers to make purchases or open accounts--is definitely on the rise. While it's impossible to put exact numbers on it, a report last year by the General Accounting Office said that up to 750,000 Americans are victims of identity theft each year.

There's certainly plenty of anecdotal evidence within the Armchair Millionaire community. When we asked members about identity theft, we heard from several people who had been victimized. This story was typical:

Mysterious credit card user. "I had credit cards that I had not used for some time suddenly appear with balances. I canceled the cards and was not penalized and also asked the credit bureaus to put a fraud alert on my Social Security number. I am also checking my charges on the Internet almost daily as this will probably happen again." --Steve

As your sister experienced, the hardest thing about having your identity stolen is clearing out the illegal activities from your credit report. It's certainly far easier to keep it from happening in the first place. My guide provides the steps everyone should take to protect their identity.

The Armchair Millionaire Guide to Preventing Identity Theft

• Careful with your checks. Never have your Social Security or driver's license numbers printed on your checks. Put your work phone number instead of your home number on your checks. If you have a P.O. box, use that instead of your home address.
• Careful with your credit cards. When you pay your credit card bills, don't write your full account number on your checks, but just the last four digits. This prevents everyone who has access to your check as it is processed from capturing your account number. When you get a new credit card in the mail, sign it immediately. And when you mail your credit card bill payments, put them into a U.S. Postal Service collection box--don't leave them in your home mail box for your letter carrier to pick up.
• Careful with what's in your wallet. Minimize the amount of ID and credit cards that you carry to what you actually need. If you have credit cards you never use, leave them at home. (Or better yet, cancel the accounts.) Don't carry your Social Security card or birth certificate except when absolutely necessary. Memorize your credit card and ATM card PIN numbers--absolutely never carry that information around with you.
• Careful with the Internet. Don't transmit credit card numbers or account information to any Web site that does not offer a secure data transaction. Look for an icon of a lock in at the bottom of your browser, or for the URL of the page at which you input your data to begin with "https." Never give out personal information unless you initiated the transaction and you trust the merchant, and never email your Social Security or credit card numbers.
• Careful with your records. Invest in a good paper shredder and use it often. Old credit card receipts and bills, bank statements you no longer need--anything with your account information on it--should go through the shredder before you toss them. Same goes for all those credit card offers you get in the mail.

THE BOTTOM LINE: With all the tools available on the Internet, you no longer need to rely solely on your financial advisor to get your questions answered. While it will never replace that human touch, it can absolutely make you a better, more-informed manager of your own money.