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Identity theft. You're hearing the words more and more, on TV and especially online. And there's good reason. Identity theft is among the largest growing crimes in the world, and it costs consumers millions per year. Here are some facts about identity theft and how you can prevent it from happening to you.

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Identity Theft Statistics

Here are some eye-popping stats about ID theft.

• There were 10 million victims of identity theft in 2008 in the United States (Javelin Strategy and Research, 2009)
• 1 in every 10 U.S. consumers has already been victimized by identity theft
• 1.6 million households experienced fraud not related to credit cards (i.e. their bank accounts or debit cards were compromised) (U.S. Department of Justice, 2005)
• Those households with incomes higher than $70,000 were twice as likely to experience identity theft than those with salaries under $50,000 (U.S. DOJ, 2005)
• 38-48% discover someone has stolen their identity within three months, while 9-18% of victims don't learn that their identity has been stolen for four or more years (Identity Theft Resource Center Aftermath Study, 2004)
• 50.2 million Americans were using a credit monitoring service as of September 2008 (Javelin Strategy and Research, 2009)
• It can take up to 5,840 hours (the equivalent of working a full-time job for two years) to correct the damage from ID theft, depending on the severity of the case (ITRC Aftermath Study, 2004)
• The average victim spends 330 hours repairing the damage (ITRC Aftermath Study, 2004)

Now that you know why identity theft is so dangerous, here's how you can help to prevent it.

ID Theft Prevention

Here are the most effective ways for you to avoid becoming a victim.

• Shred financial documents and paperwork with personal information before you discard them
• Protect your Social Security number and avoid carrying your Social Security card in your wallet or write your social security number on a check
• Don't give out personal information on the phone, through the mail, or over the internet unless you know who you are dealing with
• Never click on links sent in unsolicited emails; instead, type in a web address you know. Use firewalls, anti-spyware, and anti-virus software to protect your home computer; keep them up-to-date
• Don't use an obvious password like your birth date, your mother's maiden name, or the last four digits of your Social Security number
• Keep your personal information in a secure place at home, especially if you have roommates, employ outside help, or are having work done in your house

Knowing what I do about identity theft, I went ahead and signed up for ID theft protection. For around $10 per month, I don't have to worry about becoming a victim. The program monitors my credit reports for any unusual activity, and I'll also be provided with a dedicated professional to work my case in the event my identity is ever compromised. I don't have 330 hours to spend repairing the damage done by an ID thief, do you?

Ryan Guina is an entrepreneur and writer. He has worked for Fortune 500 companies and served six years in the USAF. He writes about money management and small business topics at Cash Money Life and military money topics at The Military Wallet. You can follow his twitter feed.

Your credit report includes very important documentation of your credit history, which is used by lenders to assess risk as well as employers and other agencies which have a vested interest in how well you manage your credit and finances. For this reason, it is imperative each consumer not only take the necessary steps to improve their credit management but also to remain abreast of the information reported to the credit bureaus.

It is not the job of the credit bureau to determine if the information is correct. This responsibility falls on the consumer. With this in mind, you should take advantage of the opportunity to review your credit report for free at least one time annually from each reporting bureau. It is during this annual review that many consumers discover fraudulent activity on their account which may be an indication of identity theft or credit card fraud. When a consumer suspects they are a victim of either credit card fraud or identity theft, the first step they should take is placing a fraud alert on their credit report.

What is a Fraud Alert?

When you request a fraud alert to be placed on your credit report, you are asking the credit bureau to place a special alert on your report that will notify those who pull it or businesses that honor credit card accounts that fraudulent activity is suspected. This should in turn result in that business or lender taking extra steps to confirm the identity of any person trying to establish or use credit in your name.

Placing a Fraud Alert on Your Credit Report

If you believe you have been a victim of identity theft or credit card fraud or suspect you might be vulnerable to these crimes, you can contact any one of the three credit bureaus to request a fraud alert to be placed on your credit report. In contacting one credit bureau, they are in turn required to report the alert to the remaining bureaus. Both Equifax and Experian provide consumers the option to flag their credit report using an online form.

Once you have requested that a fraud alert is placed on your credit report, that initial alert will remain in place for 90 days. During this time, anyone who reviews your credit report will be alerted to the potential fraudulent activity and should take special precautions before approving credit.

If you have proof that you are a victim of identity theft (you have filed an identity theft report with a law enforcement agency), you can request an extended fraud alert which will be in place for seven years.

Protecting your credit

A fraud alert is just one step that can be taken to protect your credit from identity thieves. Since the success of a fraud alert depends largely on the actions of potential creditors and businesses, it is not a surefire method of protecting your credit. Other alternatives include a credit freeze or credit monitoring service. A credit freeze will prohibit potential lenders and other third parties from reviewing your credit report, while a credit monitoring service will monitor activity on your credit report and alert you to changes that take place.

The FICO(R) 8 Score , according to FICO, is becoming a popular choice for consumer credit risk assessment among banks and financial institutions. Being used by over 2,500 so far, this score is a way to determine the risk involved in taking on a customer.

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