Free credit reports

Keeping an eye on your credit report is your first step to protecting yourself.

Federal law grants you a free credit report each year, and each of the three major credit reporting agencies must provide one.

I recommend staggering your credit report requests. For example, request a report from Experian. Four months later, request one from Equifax. After four more months, request it from TransUnion.

Credit activity should appear on all reports. However, there may be discrepancies among reports from the three bureaus. Also, be aware that a credit report doesn't include your credit score.

You can request your free reports at AnnualCreditReport. Be sure you go to the correct site! Many sites use the word Free in their names, but for free reports mandated by Congress, you want AnnualCreditReport, period.

Freezing your credit

If you want another level of security, you can freeze your credit report. This prevents new creditors from accessing your credit report.

That means they're less likely to issue credit to an identity thief. Of course, that assumes that the creditor consults a reporting agency.

Companies that already have your business can still access your report for fraud investigation, collection, account review and the like.

Plan carefully if you freeze your credit because you can’t apply for new credit with a freeze in place, and credit limits cannot be increased on existing accounts.

You can lift a credit freeze; however, it may take three days or longer to take effect.

A freeze can be lifted temporarily for a particular creditor. You just need to call the credit agencies, verify your identification, provide a special PIN and then you name the creditor. You may need to provide a second PIN to the creditor as well.

If you plan in advance, you can lift a freeze for a set amount of time ranging from 1 to 30 days. This is helpful if you are comparing credit card or mortgage rates.

You must freeze your credit with each of the three major agencies. In most cases, you will pay $10 to freeze your credit. The amount depends upon your state of residence, and some states limit freezes to seven years.

There is also a charge for lifting a freeze permanently. Again, this is usually $10.

Things are different if you can prove that your identity was stolen. Fees for credit freezes and removals are generally waived.