Who are you?

The possibility of identity theft is a problem that faces business owners and their bank accounts. Identity theft is a real danger, but the likelihood of becoming a victim is often highly exaggerated. You’ve seen those TV commercials for FreeCreditReport.com wherein a young guy sings a catchy tune bemoaning the fact that he’s a loser driving a dumpy old car or is still living at home because he fell victim to identity theft. This company says it will protect you from that fate – for $14.95 a month.

Or how about Lifelock? That’s the company that says it will take steps to prevent someone from stealing your identity, and pay you up to $1 million if it fails to do so. It costs $110 a year.

I’m not going to say these services aren’t worth the money; that’s a decision you have to make yourself. But there are many free and inexpensive things you can do to protect yourself – some of which are the very things these companies are willing to do for a price.

Yes, those commercials do dramatize genuine risks. And for those who fall victim to identity theft, the consequences can be a nightmare. But you should know the degree of risk that any one of us will become a victim has been significantly reduced by new rules adopted by the Federal Trade Commission (FTC) and major financial institutions.

One of the most common types of identity theft schemes has been the so-called new-account fraud. This is where the culprit uses personal information such as your name and Social Security number to open up a new credit account in your name. Until November of 2008, a thief could open up an account in your name but use a different address.

In the age of easy and instant credit, that allowed the thief to make a major purchase, say a new television set, and have it delivered to his address under your name. You wouldn’t know anything about all of this until you applied for credit yourself and got turned down because you never paid for that new TV. Under that scenario, your credit standing has been seriously compromised.

Now if someone tries to open a new account in your name with an address different from the one already in your credit bureau files, the credit issuer is required to verify that the applicant is really you. That will usually result in the credit issuer calling the telephone number in your credit bureau files to speak with you to verify personal information that only you could know.

And in November of last year, the FTC provided businesses with a set of 26 “red flag” rules intended as alerts to the possibility of identity fraud. They include such obvious things as photo ID that is not consistent with the person’s appearance, and unusual credit activity, such as an increased number of accounts or inquiries.

Many, if not most, of these 26 red flags would seem quite obvious, but monitored together they are expected to go a long way toward curbing the incidence of ID theft.

Among those free or low-cost and proactive things you can do yourself to minimize your identity theft risk is placing a credit freeze on your reports at the three main credit bureaus. Forty-seven states and the District of Columbia have enacted laws requiring the credit bureaus to allow the placing of credit freezes. The procedures for doing this vary by state. You can get more information at consumersunion.org/campaigns/learn_more/003484indiv.html. It’s also a good idea to check your credit report once a year at annualcreditreport.com (not to be confused with freecreditreport.com) or by calling 877/322-8228.

Your ID score is another tool that has just been made available to the general public. In use for a number of years by creditors and financial institutions, the ID score calculates the relative risk that customers are in fact who they say they are. It alerts businesses to red flags that may indicate potential fraud.

San Diego-based ID Analytics has made this score available free to consumers at myidscore.com. To get your ID score, you’ll need to provide some personal information (your Social Security number is not required) and answer a few questions about your finances. The result is a score between 1 and 999; the higher the score, the higher your risk for identity theft.

Paying to guard against identity theft may or may not be an unnecessary entry on the debit side of your financial ledger. However, the likelihood of you becoming a victim is probably a good deal lower than you imagine, and there is much you can do yourself to lower that risk even further.

The author is a freelance writer based in Abington, Pa. He has 40 years experience in business management and financing.