How to Avoid Identity Theft

If you're like most people, then you probably handle a significant amount of your financial transactions over the Internet these days. From online shopping and auction sites to online banking, bill pay, and even stock trading, you can manage your money matters from your own home with just a few clicks of the mouse. But this convenience does come at a price: it can sometimes leave your personal data vulnerable to would-be thieves who can then go on to wreak havoc with this sensitive information. That's why it's critical that you learn how to avoid identity theft while shopping or banking online.

The first step you need to take in order to avoid identity theft is to be aware of your overall financial picture. This means you should monitor your checking and savings account balances, as well as your credit card statements and stock portfolio on a monthly basis at a minimum. By doing this, you'll be able to notice any unauthorized withdrawals or charges, and take swift action to limit the damages. Unusual activity in your accounts can also signal that your passwords or personal identification numbers (PINs) have been compromised somewhere along the line. Since these codes are often the first line of defense in helping to avoid identity theft, you'll have to change those ASAP.

Keeping abreast of your personal finances also means you should check your credit rating at least once a year. There are three major credit reporting agencies, and by law you are entitled to a free credit report every 12 months. You must request it, though, so be sure you take advantage of this service. Examining your credit report annually can help you avoid identity theft by showing whether or not someone has tried to take out loans in your name or are otherwise using your personal data in fraudulent ways.

The second step in how to avoid identity theft is to be smart about your passwords and PINs. Don't give them out to anyone except your spouse or other close family members who might need access to your records for a legitimate reason. Moreover, you need to make sure that you use difficult passwords that are hard for others to guess -- so no birth dates or anniversaries that everyone else knows about. In addition, passwords and PINs for your different accounts should all be different, that way if one of them happens to be stolen, it won't affect every account you have.

And finally, common sense goes a long way towards helping avoid identity theft. Don't shop on websites that look sketchy or that don't offer secure connections. Don't give out your Social Security number unless it's absolutely necessary. Don't leave financial account passwords or PINs on post-it notes on your work computer where it's easy for others to simply walk by and copy the information.

By following these steps and being careful about who has access to your sensitive data, you can lower your exposure to fraud and hopefully avoid identity theft altogether.