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Identity Theft

Posted by: Staff Writer | Jul 22,2007
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Identity theft is on the rise every year.  Simply put, identity theft is the process of stealing personal information, such as credit card and Social Security numbers, to steal money and open up new accounts in a person’s name. Don’t think that it can’t happen to you because it happens to people from all walks of life and economic backgrounds.  

Identity theft is can drain bank accounts of thousands of dollars and ruin reputations.  People have had to move from a community because of the crippling damage from identity theft.  There have been cases where a thief stole hundreds of thousands of dollars and even bought homes in a person’s name.  Identity theft is clearly something you want to avoid.

Here is a step-by-step primer on how to combat the growing threat of identity theft. 

How Identity Theft Happens

Identity theft can occur both on and offline.  Here is a complete list of the causes of identity theft:

Phishing: This is the main cause of online fraud.  Think of a spam email that asks for sensitive information, such as your credit card number and Social Security number.  Never give this out unless you’re absolutely sure it’s a reputable and secure site.  Keep in mind that phishing scams may not be entirely obvious. A phishing website may look like a mainstream site, but it is actually a counterfeit. 

Ways to counter phishing:
  1. Hover your mouse over the link in an email.  The link should be for a legitimate site.  A subtle change can mean it’s counterfeit: such as paypals.com, instead of paypal.com.  
  2. Never give out information prompted by an email unless you were expecting it.  If you’re unsure, contact the company and inquire if the request is legitimate. 
  3. Don’t just go by an email or a website’s appearance.  The URL is everything.  Scammers are getting more sophisticated and dummy phishing sites are looking more professional. 
  4. Don’t give out information on the phone either.  Phishing isn’t Internet-only.  There are fraudulent charities and other offers that will also try to get your personal information. 
  5. Protecting your passwords is also highly important for avoiding phishing. Mix up your passwords and make them complicated: a mix of letters and numbers.  Don’t use the same password for every site you visit and don’t store your passwords on your computer unless you’re certain your computer is well-protected. 
  6. Spyware can actually read the keys you type on your computer, bypassing encryption, so both anti-virus and anti-spyware software is vitally important. 
Dumpster Diving: Thieves have no qualms about getting down and dirty.  They will literally dive into trash cans looking for financial paperwork.  You should either shred financial paperwork or keep them in a safe location.  Never just throw them in the garbage.  These include:
  1. Credit card bills
  2. Investment statements
  3. Bank statements
  4. Bills
  5. Credit card offers
  6. Magazine offers/mailing labels
Investment paperwork, bank statements, and bills may be needed at tax time so it’s not necessarily wise to shred these documents right away. 

Change of Address Fraud: An identity thief will redirect your mail to go to another location.  If you haven’t received certain bills in a long time, you may be the victim of a change of address scam.  The best way to avoid a change of address scam is to monitor your credit report.  Let’s go there next: 

Detect Identity Theft

First things first, you’ve got to get a copy of your credit report to make sure you haven’t been the victim of identity theft.  This is important!  Just relying on credit card fraud protection is not nearly enough.  If a thief opens up a new account in your name, this is not going to show up on your credit card bill, but only on your credit report.  So here’s what you do:
  1. Go to AnnualCreditReport.com or FreeCreditReport.com to order a copy of your credit report. 
  2. Also important: don’t just order one copy, order a copy from each of the main three credit bureaus: Experian, Equifax, and TransUnion.  A case of identity theft may show up on one credit report but not another. 
  3. Scour that credit report.  A credit report is separated into 4 different sections: Identifying Details, Credit History, Public Records, and Credit Inquiries.  The most important sections to spot identity theft are Credit History and Credit Inquiries.  Here you will see if anyone else opened up an account in your name.
  4. If you see a suspicious listing, Don’t Panic!  It could be a mistake on the part of the credit bureau, such as a listing for someone with a similar name, or it could be an old credit listing that you’d forgotten about.  If it’s not, however, you need to take action. 
  5. Go through your credit card bill as well, top to bottom, and make sure that there have been no fraudulent charges. 

Take Action Against Identity Theft

If you have spotted a suspicious or fraudulent item on your credit report or credit card bill, you need to take action.  Here are the steps:
  1. Make copies of your credit report (keep these safe).
  2. Circle the fraudulent item on the credit report. 
  3. Write a letter – with calm, professional language – explaining the fraudulent item in the report.  Explain why you believe the item to be fraudulent and that you want the item to be removed.
  4. Also request evidence from the credit agency that you authorized the listing.  If they cannot provide such evidence, the credit inquiry will have to be removed.    
  5. Send a copy of the credit report and the cover letter to BOTH the credit reporting agency that lists the fraudulent item as well as the credit agency where the fraud occurred – such as a credit card company where an account was opened in your name.
  6. Wait at least 30 days before inquiring as to whether the request has been processed. 
  7. File a police report about the identity theft.  Remember, it isn’t just financially damaging, but a crime has been committed. 
  8. Contact the Federal Trade Commission @ ftc.gov or call 1-877-ID THEFT (877-438-4338) to report the theft. 

Monitor and Prevent Identity Theft

Hopefully you will not have to go through the above steps.  By far, the most effective method of countering identity theft is through credit monitoring.  As mentioned, credit card fraud protection is insufficient for stopping identity theft.  Even ordering up a free copy of your credit report once a year is insufficient.  An identity theft could do something in June that you don’t catch until December.  Instead, credit monitoring is most highly recommended, as it monitors your credit in real time.

With credit monitoring, you will be alerted as soon as fraudulent activity is detected.  While credit monitoring services do cost a monthly fee, it’s nominal, and worth the cost for the amount of money and damage to reputation that identity theft can cause. 

Other Steps to Take to Prevent Identity Theft

These are not quite as effective as a credit monitoring service, but still useful. 

Freezing Credit: The process of putting a hold on your credit.  The upside is that no one else can get access to your credit and open new credit in your name.  The downside is that you will not be able to access your own credit either. 

Fraud Alerts: These are similar to credit monitoring, in that you will be alerted to fraudulent activity.  The caveat is that a fraud alert typically does not pick up every type of fraud, so it is not as effective a method as using a credit monitoring service. 

 
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