A few simple steps will prevent data theft and financial loss

Identity theft is an ongoing threat to Americans' financial security that cost consumers and businesses some $49.3 billion in 2006, according to a survey by Javelin Strategy & Research.

In the last few years, tens of millions of people's personal data have been lost, stolen or put at risk.. The good news is, you can save yourself and your money from identity theft and credit card fraud by regularly reviewing free credit reports, maintaining awareness of Internet scams, and using common sense.

Take these steps to protect your personal financial information and prevent that data from being fraudulently used.

1) PROTECT YOUR CREDIT

Monitor your credit report. The Fair Credit and Reporting Act entitles all Americans to a free copy of their credit report from each of the three main credit bureaus per year—Transunion, Experian and Equifax.

Although the data on each report is somewhat different, each one provides a snapshot of your credit history, a summary of your accounts and any credit inquiries. By ordering one report every four months, you can alert the authorities to any unusual activity throughout the year. Read more about your credit report here.

Freeze your credit. The three credit bureaus now offer the option of "freezing" your credit report. That means even if thieves obtain your personal data or your Social Security number, they will not be able to open up credit accounts or take out loans in your name.

If you want to take out a loan or open a new account, you can use a private access code or PIN number to do so.

While a "freeze" offers protection against ID theft, it does cost about $10 to place and lift a freeze, and the amount of time and documentation it requires can be inconvenient (laws and procedures vary by state; to get the latest information, check the Consumer Union identity theft website: www.financialprivacynow.org).

Avoid useless services. The digital theft epidemic has spawned services like identity theft monitoring and insurance that will cover you in the event of a financial loss. In most cases these are not worth the money.

A credit monitoring service can only alert you when your credit has already been breached; it is not preventive. And in most cases your bank or credit card company is already insured to cover financial losses.

2) SAFEGUARD YOUR DATA

In addition to being vigilant about your credit, the next most powerful safeguard is to protect your personal data at home, at work and whenever you use the Internet.

Update your home computer. Check to make sure that the security system you use is up-to-date and that your firewall is functioning.

Downloading the most current web browsers and updating other programs also helps to keep your computer more secure, as the most recent software releases contain security updates.

Beware of scams. Never answer an email requesting personal financial information, even if it seems to come from a company or bank you use. Always call the institution directly when updating accounts.

Limit the use of your SSI. Many companies request your Social Security number as a form of ID, but you don't always have to provide it. Resist giving out this key identifier except when certain tax or financial documents require it.

Protect your paperwork. If baby sitters, housekeepers or other visitors have access to your home office, be sure to keep all personal papers locked up. Not all cases of id theft involve strangers.

Likewise, get in the habit of using a cross-cut shredder to dispose of personal documents and bank statements.

THE BOTTOM LINE
Identity theft can be a hassle and cause immense financial loss, so it's worth the time and effort to take as many precautions as you can to prevent data theft from occurring in your own life.