This is the first installment in a two-part MoneyLine series about Rhode Island's new security-freeze law. The second part will appear tomorrow.

Good news for Rhode Island consumers:

A new state law will soon let you place a "security freeze" on your credit report to ward off potential identity theft.

In general, the new law says that if you tell a credit reporting company to apply a security freeze, the company can't release information in your credit report to lenders.

Because most lenders won't issue credit without first looking at your credit report, freezing the report can prevent identity thieves from opening new accounts in your name.

The legislation was recently approved by the General Assembly and signed into law by Governor Carcieri. Key provisions will take effect Jan. 1.

Michelle Jun, a staff lawyer for Consumers Union, the nonprofit organization that publishes Consumer Reports, said the new law will help Rhode Island consumers.

A security freeze "is one of the most useful tools for consumers to utilize . . . to protect themselves" against identity theft, Jun said.

Your credit report is the official record of your personal credit history. For example, it lists your car loans, mortgage loans and credit card accounts and balances, and whether you pay your bills on time, according to the Federal Trade Commission (FTC).

Credit reporting companies -- such as Equifax, Experian or TransUnion -- sell that information to lenders and others. Those outfits use the information for lots of reasons. One is to help decide whether to grant you credit and on what terms.

When an identity thief gets your name, Social Security number, credit card number or other such information, the thief may apply for a credit card or other such account in your name.

The thief wants to use the account to buy things in your name without paying. The delinquency shows up on your record, and you're left to clean up the mess.

That's where the security freeze comes in. When the thief applies for a credit card or other such account in your name, the credit card issuer or other lender will typically check your credit report first.

But if you've activated a security freeze (sometimes called a credit freeze), the credit reporting company will refuse to release your credit report to the credit card issuer or other lender.

As a result, the lender probably won't agree to open an account -- foiling the identity thief.

The legislation, which was sponsored by state Rep. Amy G. Rice, D-Portsmouth, Middletown, Newport, and state Sen. Beatrice A. Lanzi, D-Cranston, gives Rhode Island consumers a valuable weapon in the ever-growing battle against identity theft.

Every week, it seems, some outfit fails to keep secure a list of consumer names, addresses, Social Security numbers and other personal information.

Thieves may use this information to commit fraud, and consumers often must spend months trying to resolve the resulting problems.

"Identity theft is a growing menace for consumers in the new economy, as vast quantities of sensitive, personal information has become vulnerable to criminal interception and misuse," the new state law says.

Identity theft "violates the privacy of our citizens, ruins their good names and may subject them to restricted access to credit, diminished employment opportunities, and months or years of effort to repair damage to credit histories," the law says.

Last year, more than 600 Rhode Islanders filed identity-theft complaints, according to a report by the FTC's Identity Theft Data Clearinghouse. Many of the complaints involved credit card fraud; some involved phone or utilities fraud, bank fraud or other types of crimes. Three-quarters of identity-theft complaints in Rhode Island came from people age 18 to 49, the report said.

The new Rhode Island law provides consumers "a protective tool" to prevent identity theft before it happens, Jun said in a telephone interview from the Consumers Union office in San Francisco.

Angela Thomson, a director of the Financial Planning Association (Rhode Island chapter), a trade group for financial planners and others, urged consumers to take advantage of the new law's provisions when they take effect in January.

"If you think you're subject to identity theft, you certainly don't want anyone accessing your accounts, and you want to be as proactive as you can," Thomson said in an interview at Coastal Financial Planning Inc. in Lincoln, her fee-only financial-planning firm.

Jun said you should consider putting a security freeze in place even if you're not a victim of identity theft; the freeze can protect you, helping you avoid becoming a victim, she said.

The new law will give Rhode Island consumers "the means to protect themselves, their credit information and their financial status," Lanzi said in a statement.

Rhode Island is one of 25 states -- including neighboring Connecticut -- that allow for security freezes, Jun said.

Coming Tomorrow: How to put a security freeze in place.

Neil Downing is a Journal staff writer and author of The New IRAs and How to Make Them Work for You. Questions about your money matters? Call us at 1-401-277-7484 and leave a message, or e-mail:

moneyline@projo.com

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