How Checking Your Credit Report Can Stop Identity Theft

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The following is a guest post. Enjoy! 

How Checking Your Credit Report Can Stop Identity Theft

Identity theft costs American consumers and businesses almost 50 billion Dollars annually. In 2009, more than 11 million people were victims of identity theft and lost an average of almost $5000 per person. This type of crime is growing at a rapid pace due to the sophistication of hacking groups and the ability of thieves to sell private information on the internet. As more personal information moves online with social media and technology like “the cloud”, identity theft may even become an even bigger problem. With regular monitoring of your financial data, it is possible to catch the theft in progress and stop it before serious damage is done. So, how can you spot it?

Checking Your Credit Report

Keeping close tabs on your credit report is important if you’re going to notice any activity that seems abnormal. Your credit report shows your entire credit history, and you should be able to spot anything fraudulent.

The best place to check all 3 of your credit reports (from the three biggest credit reporting agencies – Equifax, Transunion, or Experian) is Annualcreditreport.com. The Fair Credit Reporting Act (which was recently amended in 2010) allows all people to have free access to their credit information (report), one time per year. You can check all three reports free of charge and search for activity that looks suspicious. Your good credit score can be seriously damaged by fraudulent activity, so keeping a close watch on it is important. However, viewing your credit score is not included in the one time per year free credit report viewing.

How to Spot Identity Theft

Your credit report shows all open and closed credit accounts, all the way back to when you opened your first credit card or paid your first utility bill. If you see anything that you don’t recognize, it may be the result of identity theft. The FTC recommends that consumers check their credit at least once per year to make sure it doesn’t contain any fraudulent activity.

Other signs of identity theft may include:

– Phone calls or mail saying you have been approved for credit cards or loans that you did not apply for.
– Missing financial mail like bank or credit card statements.
– Bills and/or credit card charges for items you did not purchase.

What to Do if You Notice Fraud

If you do notice suspicious activity on your credit file, you can have a fraud alert placed on your report. This alert will help stop any unauthorized use of your credit. There are 2 types of fraud alerts, an “initial alert” and an “extended alert”.

An initial alert is put on your credit file for around 90 days. This is a step you might take if you believe your personal information may have been stolen and could be used fraudulently. If you know you are a victim of identity theft already, you may need to file an extended alert which will stay on your credit file for 7 years. This means that creditors must contact you before issuing any new credit in your name.

You will also need to close any accounts that were opened in your name. You can contact the fraud department of the company that issued the account and explain your situation. Keep a record of all correspondence with the company. It may be important to have proof of any agreements that you have made about your case.

You also may want to file a complaint with the FTC and the police. This can help law enforcement find the perpetrators of the theft and prevent any further illegal activity with your credit.

Credit Monitoring Services

Credit monitoring is a service which can be purchased through a credit bureau like Equifax, Transunion, or Experian. This service will alert you any time new accounts are opened or suspicious activity occurs on your credit file. This would include the application for new credit cards, loans or mortgages, or the opening of an account with a mobile phone provider. Some companies that provide credit monitoring will also insure you for losses that result from identity theft. The amount you will be covered for varies with each company and monitoring plan.

Conclusions

Identity theft is a serious problem that can be very expensive and time consuming to deal with. There are measures you can take before a theft happens to lessen the chance that you will be a victim. Regular monitoring of your credit report and financial information will help you notice illegal activity before it turns into something more serious.

How about you all? Have you ever been a victim of identity theft? If so, what steps did you take to correct it? Have you ever noticed any unauthorized charges on your credit cards? 


What steps do you take to protect yourself from identity theft? How often do you check your credit report?  


Share your experiences by commenting below!

Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.

  • Personally, I’ve been lucky enough to not have been a victim of identity theft so far in life. As far as bad luck goes, I think having your identity stolen would be one of the worst things that could happen since it can affect your purchasing and borrowing ability as well as your credibility as a person for years to come.
  • How I protect myself from identity theft
    • There are several steps I take to stop identity theft from happening to me, the majority of which are covered in a previous post I wrote which can be assessed at the following link – How To Protect Yourself Against Identity Theft
    • The main steps I take include the following – 1) place a free 3 month fraud alert on my credit report at all three of the main credit agencies (this must be renewed every 3 months), 2) monitor my credit report once a year using the free site mentioned above in this post, and 3) reduce the amount of junk mail I get by “opting out” of these lists at a site called Opt Out Pre-Screen (reducing the amount of junk mail decreases the amount of documents floating around the trash and mail system with my personal details on it).
    • Several additional steps that have been added to my “identity theft prevention regimen” lately are to never click links in scam emails and always make sure I see that an Internet website is secured before entering my payment details.
  • @ Does insurance cover identity theft?
    • As I was reading this post, I began to think that it would be nice (since identity theft is becoming more and more common these days) for some type of insurance policy an individual would already be carrying would protect him or her against damages done by identity theft. 
    • According to the Insurance Information Institute (III), insurance companies are now offering identity theft coverage either as add-ons to home insurance policies or as separate policies. 
    • As mentioned above, another increasingly popular service that provides identity theft coverage is credit monitoring services.
    • So, since identity theft coverage is not currently included in regular insurance, the question becomes whether or not this type of coverage is worth the extra $25-$50 per year. 
    • An investigation in to answering this question would be a good topic for a future post. However, my instinct tells me that it probably is not worth the money for the current risk level. Additionally, much of the service offered by credit monitoring agencies can actually be performed by you manually using the steps described above (setting up fraud alerts, etc). 
    • But, we may see this changing in the coming years as identity theft becomes more prevalent.
  • @ How identity theft happens –
    • One of my more computer-savvy friends recently told me, much to my surprise, that the majority of identity theft incidents happen simply by random occurrence rather than specifically targeting a certain individual. 
    • What he said would happen is that a hacker runs a computer script that scans through millions of account numbers, applying number and letter codes in order to discover a person’s password. If a password is “cracked,” it is more the result of random chance than targeting a specific person for personal reasons.
    • Furthermore, he told that the majority of identity theft incidents occur through non-technological means. What he meant by this was that more identity theft cases occur simply by someone eaves-dropping on a nearby conversation when a person mentions his or her Social Security number out loud or when someone finds credit card information written on a piece of paper in the trash than when someone uses high-tech computer software to hack an account.
    • I found this interesting!
  • @ How often you should check your credit report for fraud – 
    • Because identity theft seems to be turning in to a more significant problem, it begs the question of whether or not checking your credit report once per year (the free route) is sufficient.
    • In thinking about this, my thought is that checking your credit score twice per year is probably both a reasonable and safer plan.
  • @ I wonder what percentage of identity thieves are actually caught or apprehended?
    • When I had finished reading through this article, I felt slightly disheartened because it seems to me that identity theft is almost too easy for fraudsters to get away with. 
    • After all, if you are a victim of identity theft, it’s not like you can report it to the local police to look in to since the person who took your identity could be in a different country or state. So, just who goes after these people?! And furthermore, how do they prioritize which cases to investigate?
    • Because of this, I was curious to find out what percentage of identity thieves are actually caught.
    • According to a study I found on Privacy Rights.org, only about 1 in 700 identity thieves are caught. This is truly amazing! That’s a 0.14% chance!
    • Just as a point of reference, the probability that you will become a victim of identity theft is 1 in 200. Wild stuff!

***Photo courtesy of http://farm3.static.flickr.com/2285/1594411528_1512b1aad5.jpg

Comments

  1. I came very close some years ago. Someone tried to open a account at a local jewelry store. I put a freeze on my credit agencies. Checking your credit reports periodically is a good way to check if anyone is using your identity.
    My recent post 10 Happiest Jobs

  2. 20sfinances says:

    Wow, I didn't know that being hacked was more of a coincidence than specifically targeted attack. Good to know. I guess that makes sense with the rise in technology. It makes me a little nervous, but I have been in good shape so far. I will continue to monitor it and keep my fingers crossed. That and continuing to use complicated passwords. 🙂
    My recent post The Best Way to Track Expenses

    • It really does seem to be a “brave new world” out there today. I now consider it an “odd” day when I don't receive at least one email trying to trick me in to obtaining my personal information!
      My recent post Easy Like Sunday Morning Weekly Roundup – # 2 – October 16th, 2011

  3. This is all great advice, I use gofreecredit’s monitoring services and had my wallet stolen at a concert and they alerted me about some unusual purchases. Thieves work really fast to steal your identity and spend you hard earned money. So these types of credit report services should be taken advantage of. Luckily they caught this fast and stopped all payments before I can be charged. Thanks for the advice Ross hopefully people will take this into consideration.

    • @ Marcus – I hadn't heard of GoFreeCredit before. Does that work similarly to Credit Karma?
      My recent post Easy Like Sunday Morning Weekly Roundup – # 2 – October 16th, 2011

  4. I came very close some years ago. Someone tried to open a account at a local jewelry store. I put a freeze on my credit agencies. Checking your credit reports periodically is a good way to check if anyone is using your identity.
    My recent post 10 Happiest Jobs

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