Have you received a letter from your bank or credit card company lately telling you that your personal information may be compromised?  We’ve been getting these letters on a regular basis at my house. If you read further, you’ll see that these companies are trying to sell you identity theft protection for a monthly fee.  It’s a good idea to guard against identity theft, but buying protection is not the most cost effective plan for your personal finances.

You can monitor your own credit and stop identity theft for minimal money. Simply put a credit freeze on the credit reports offered by the three major credit reporting agencies.  A credit freeze prevents anyone from accessing your credit report (including you). If someone is trying to open a new credit account in your name, potential creditors will not be able to access your credit report. Creditors don’t give out new credit without it, so the thief will be stopped in his tracks.

How do you freeze your credit report? Contact all three credit reporting companies and pay a small fee to  freeze your credit report.  No one, including you, will be able to access your credit.  That means if you want to finance a car, you will be denied since the potential creditor cannot access your credit.  Don’t worry – you can unfreeze your credit for a fee when you need to.

Bottom line: The cost to freeze and release the freeze is substantially cheaper to you than the $10 plus dollars a month for credit monitoring.  Credit freezes can stop new accounts from being opened by thieves even when they have your personal information. The only effort required on your part will be planning for your  upcoming credit needs so you can freeze and unfreeze your credit accordingly. How often do you need to open a new credit account? Most of us do it very rarely, so it’s easy to plan ahead.