Unless you don’t own a television or computer you’re probably well aware of the never-ending reports about data breaches and identity theft that expose Americans to the real potential of financial fraud. And while you shouldn’t avoid living your life, you should be at the very least a little concerned about the very real possibility that identity theft could happen to you and the security of your credit reports.
Identity theft has been the top consumer complaint made to the Federal Trade Commission for 14 years in a row.
Fraud is a popular and fast growing crime. The reason is because there’s great return to the fraudsters and there’s very little chance of them ever being caught. No one wants to think about the scary possibility of being victimized by an identity thief but, thankfully, there are ways for every consumer to protect himself.
Differences in crimes
First, it’s important to understand that there is a difference between fraud and identity theft, though the two crimes are somewhat closely related.
Fraud occurs when a criminal steals a consumer’s account information and makes unauthorized charges on the victim’s debit card or credit card.
Identity theft, also known as true name fraud, occurs when someone steals a consumer’s personal information and Social Security number and uses the information to open new lines of credit in the victim’s name.
Identity theft typically comes with a very unpleasant side effect, which is credit report and credit score damage. While none of us raise our hands volunteering to be the next victim of a fraudster, it’s important that we play a role in protecting ourselves and our credit report.
Here are four effective methods every consumer can use to protect himself from identity theft:
1. Credit monitoring
When it comes to identity theft protection there are reactive methods of protection, and proactive methods. Credit monitoring is reactive and often, though not always, comes with a fee.
Credit monitoring allows a consumer to be notified when anything changes on his credit reports that could be indicative of fraud, such as a new account has been added to the credit reports. If the new account is unauthorized then the consumer should begin taking steps to clean up his reports right away, which means contacting the creditors.
With credit monitoring a consumer is the last to know when identity theft has occurred. Of course, being the last to know is still much better than not knowing at all.
2. Credit freeze or security freeze
A credit freeze is basically like Fort Knox for your credit reports. Placing a credit freeze on a credit report is a very proactive way of stopping identity thieves in their tracks before they have the opportunity to open unauthorized accounts. When a credit freeze is applied to a credit report no future lender will be able to access those credit reports, period.
Without credit report access there is zero chance that a lender will issue a new, unauthorized account in the consumer’s name. The frustrated and thwarted identity thief will simply move on to his next victim.
Credit freezes are great especially if you yourself are not actively searching for credit, as those attempts will also be declined.
3. Fraud alerts on credit reports
A fraud alert is simply a message that is added to a consumer’s credit reports. The alert lets future lenders know to be cautious when issuing new credit since the consumer either has been or suspects he has been a victim of identity theft.
When a consumer places a fraud alert on his credit reports the purpose is to inform any creditor reviewing the credit reports that the consumer wishes to be contacted directly to verify that any application for new credit is legitimate and authorized.
Fraud alerts are available to consumers at no charge. Like credit freezes, fraud alerts also offer a proactive method of identity theft protection.
However, while a credit freeze prevents a lender from pulling a consumer’s credit reports, a fraud alert merely gives lenders procedures to follow to verify a consumer’s identity.
4. Checking your own credit reports
Thanks to an amendment to the Fair Credit Reporting Act in 2003 consumers have the right to access all three of their credit reports free of charge once every 12 months. The reports can be accessed online at annualcreditreport.com.
Despite the fact that these free annual credit reports have been available for a little more than a decade only a mere 4% of the free reports are claimed annually.
Checking credit reports for errors and evidence of identity theft is important. However, checking credit reports annually as a sole means of monitoring for identity theft is probably not the most effective method of protection, unless you simply feel like you’re not at risk.
Claiming annual credit reports should be coupled with another actions to help provide a consumer with adequate identity theft protection.
How do you protect your credit?
Very informative I will share with my wife.