Every year since 1997 the Federal Trade Commission (FTC) has published an end of year summary of consumer complaints. This report, called the Sentinel Data Book, is a compilation of complaints filed directly to the FTC and to a variety of other state level organizations. The 2011 report, which was recently published, told us what we didn’t want to know: identity theft is still the number one complaint for the 12th consecutive year.
This week’s piece is going to be dedicated to better understanding ways you can prevent identity theft. First things first, there is no 100% full-proof method to avoid being a target of identity thieves. Regardless of what you may see or hear on TV or on the radio, the fact that you have an identity makes you a potential target. And, while you may be diligent protecting your own personal information, that certainly doesn’t mean your data is safe from the continuous string of high profile data breaches that seem to occur almost monthly.
You can hear audio of John Ulzheimer discussing the identity theft trend below:
Step 1: Stop the bleeding
If you believe you’ve been a victim of either true name fraud (where someone is applying for credit in your name) or account takeover (where someone is using existing credit cards that were legitimately issued to you), then the first step is stopping any bleeding. This means you’ve got to contact the credit bureaus and the lenders involved immediately. For all of their drawbacks, credit cards have fantastic consumer fraud protections. If you contact the issuer as soon as you believe your card has been compromised, your liability is capped at $50 and most issuers won’t even ask for that.
When you contact the credit bureaus you’re going to want to have them add a fraud alert to your credit reports, asap. This will notify any future lenders that pull your credit file that they need to be aware that someone is out there with access to your info and may be applying for credit in your name. You only need to contact one of the three credit bureaus. The one will share the alert request with the other two.
Step 2: Assess the damage
Hopefully, if you’ve had a credit card stolen your troubles end when you close the account and get a replacement card. But, you’re going to want to review your credit reports with a fine-toothed comb to make sure there is no evidence of other fraudulent activity. You’ll be able to get your credit reports for free because of the fraud issues.
Most people look for new accounts or new inquiries (a record of someone accessing your credit file) and leave it at that. That’s a mistake. You should also look for any errors in your personal identifying information such as an incorrect date of birth, an incorrect “Also Known As” or “Formerly Known As” or a current of former address that’s wrong. This can be evidence that someone filled out a credit application in your name and tried to slightly change the identification.
If this has happened then you are a full-blown target and need to take more aggressive steps to protect yourself. Move on to Step 3…
Step 3: Preventative Maintenance
There are a variety of ways you can protect yourself from future victimization, and none of them are perfect. You can pay to monitor your three credit reports for changes that are indicative of fraud, but that’s reactive and it’s not a cheap date. Good credit report monitoring services are plugged in at all three of the credit reporting agencies and passively track your credit files every day. Their alerts come in the form of an email or text message. The cost for these services normally runs around $15 per month.
You can also freeze your credit files, which is free for the residents of most states if you’ve been a victim of identity theft. Freezing is the process whereby the credit bureaus lock out any new creditors from accessing your credit reports and scores. That means no new credit can be extended in your name because the creditor cannot see your credit reports.
The credit freeze is a better alternative than credit monitoring but it can be clunky to manage. If you want to do anything that may require access to your credit report (new loan, new credit card, new insurance, new job, new utilities, etc) then you’ll have to “thaw” your credit reports so the legitimate party can pull it. Then, you’ll have to re-freeze it afterwards to ensure continuous protection.
You’re probably telling yourself, “Boy I’m sure doing a lot of work to address a problem that I didn’t cause.” You’re correct. This is one of those “life isn’t fair” issues that can consume our non-existent extra time. The problem is that if you don’t get involved, you forego some of your protective rights and the cost of not nipping the problem in the bud can be financially devastating.
There’s another thing to keep in mind, which is that this doesn’t cover every conceivable fraud scenario. There are countless other ways identity thieves can rip us off (Medical ID theft, Tax fraud, Insurance fraud, Employment fraud, Synthetic fraud, Mail theft, Dumpster diving, Phishing, Spear Phishing, Vishing, etc). This is very specific to credit related fraud.
John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow John on Twitter.