Created in collaboration with the credit experts at Experian
In the past, thieves wanted to steal your car, your wallet or personal property. Today, your identity may be the most valuable thing a thief can steal. Identity theft is the act of stealing your identifying information with the intent of using it for fraudulent purposes.
Identity theft happens in a number of ways. There may be a data breach at a company, theft of a laptop computer containing personal information, access to sensitive records at a doctor’s office, stealing mail, or most common of all, taking documents from your trash.
The term “identity theft” is often used to describe many forms of fraud that involve use of a person’s identifying information:
- Government documents fraud, including fraudulently applying for Social Security benefits in someone else’s name, for example.
- Stolen credit card numbers used to make fraudulent purchases.
- Telephone or utilities fraud
- Check fraud
- Insurance fraud
The list goes on and on. These are all crimes that can result from someone stealing your identity and other sensitive documents.
Applying for new credit accounts, called “new account fraud” or simply “credit fraud,” is one of the most often cited crimes resulting from identity theft. For that reason, it is increasingly important that you understand what credit fraud and identity theft are and how they happen so that you can take steps to protect yourself.
This chapter will answer the following key questions about fraud and identity theft:
- What is credit fraud?
- How does fraud happen?
- What is the impact of identity theft on credit?
- How do I prevent identity theft?
- How do I fix credit fraud and recover from identity theft?
What is Credit Fraud?
Credit fraud is a common crime committed by identity thieves. After stealing your identifying information, the identity thief will use the stolen information to apply for credit in your name. If they managed to steal an account number, they may use your account to make purchases without your knowledge. You may not know you have been a victim until you receive your monthly statement and see the charges or until you check your credit report.
How Does Fraud Happen?
Here are just a few ways you might become a victim of identity theft:
- Almost weekly there is news of a government agency or private business having their computers hacked into and people’s personal information compromised. While the news seems scary, online shopping is actually very safe as long as you take some simple precautions. The most important thing is to make sure the company you are doing business with is using a secure website before entering any personal information online. For example, when you visit Montgomery Ward’s online, you’ll see that the browser URL begins with “https.” The “s” means the site is secure.
- Documents in trash cans at the curb are stolen for the identifying information they contain. This is actually one of the most common sources of identity theft.
- Devices on ATM machines capture credit card information and PIN numbers that are then used to drain bank accounts.
- A quick cell-phone video over your shoulder while you are checking out at the counter and an identity thief can have your credit information, PIN number and possibly your driver license and Social Security number.
- Leaving purses, wallets or documents in the car can tempt identity thieves to break in and steal your belongings. Identity thieves are not looking to steal the car radio; the identification information on your documentation can be far more valuable.
Once thieves have your identity, they can use it to open new credit accounts, create false documents to pose as you, or use it to empty your existing bank accounts or max out your credit cards.
What is the Impact of Identity Theft on Credit?
Identity theft can wreak havoc on your credit report and credit scores, preventing you from opening new accounts, qualifying for services like utilities or cellular telephones, or qualifying for a new lease.
If you’ve been a victim of identity theft or credit card fraud, evidence of the crime may appear on your credit report. Unfamiliar credit accounts, addresses you don’t recognize, names you’ve never used, or requests for your credit history you didn’t make can all be signs that you are a victim of credit fraud.
Checking your credit report frequently is very important because it can provide the first clues that you’ve been a victim of identity theft.
How Do I Prevent Identity Theft?
Unfortunately, even if you do all the right things, you can still fall prey to identity theft.
However, there are several things you can do to reduce your risk. Here are a few:
- Never carry unnecessary identity documents in your purse or wallet. Social Security cards are, unfortunately, a common example.
- Never leave your purse unattended in a shopping cart or shelf while sorting through the shelf or rack for that perfect piece of clothing.
- Never leave documents, packages or your purse or wallet in the seat of your car when you go into the mall. They make prime targets for identity thieves and old fashioned crooks. Lock them in the trunk or glove box instead.
- Be aware of shoulder surfers. Identity thieves can take a picture of your credit card and video you entering your pin, right over your shoulder as you check out.
- Shred any sensitive documents you receive in the mail, such as preapproved credit offers or documents containing your social security number and other personal information.
How Do I Fix Credit Fraud and Recover from Identity Theft?
If you’re a victim of fraud or identity theft or have reason to believe you’re at increased risk, trusted credit agencies like Experian can help you protect your credit history. Here are the steps you should take if you suspect you’re a victim of credit fraud:
Step 1: Add an Initial Security Alert
An initial security alert lasts one year. It tells anyone who requests your credit report that you may be a victim of identity theft and to take additional steps to verify your identity. You can provide a telephone number and ask that the lender call you before granting credit in your name. You can set up a security alert for free at www.experian.com/fraud.
- When you add an alert with Experian, it will notify the other nationwide consumer credit reporting companies that you requested an Initial Security Alert. The other companies then add a similar alert to their files and send a confirmation directly to you. They also remove your name from preapproved credit offer lists for six months. Doing so may reduce the chance that someone will use an offer of credit to fraudulently apply for credit in your name.
- Experian will provide you with a Federal Trade Commission-approved summary of identity theft victims’ rights, which are designed to help you recover from credit fraud. Some of these rights are:
- You have the right to request that a fraud alert be added to your credit report with each of the three national credit reporting agencies
- You are entitled to a free copy of the information in your credit report so that you can check for signs of fraud.
- You have the right to obtain copies of certain documents from your creditors that relate to the fraud, such as fraudulent credit applications.
- You have the right to obtain information from a debt collector that is collecting on a fraudulent account, such as the name of the creditor and the amount of the debt.
- You have the right to ask the credit reporting agencies to block fraudulent accounts from appearing on your credit report if you supply a valid identity theft report.
- You can prevent businesses from reporting information that is the result of identity theft by sending your request to the address they specify and providing an identity theft report.
To learn more about identity theft and how to deal with its consequences, visit www.consumerfinance.gov/learnmore, or write to the Consumer Financial Protection Bureau. You may have additional rights under state law. For more information, contact your local consumer protection agency or your state attorney general.
When you request the alert you also can ask the credit reporting agency to send you a free credit report through the mail, or you can access your credit report immediately if you add the Initial Security Alert online.
Step 2: Review Your Credit Report; File a Police Report
Review your credit report carefully. If you find evidence that you are a victim or know that you have been victimized, contact your local law enforcement agency.
Your police department can help you complete an Identity Theft Report, or Fraud Report.
This is an important step as you may need to have that police report when you contact lenders or others about fraudulent charges or accounts.
With a police report you can take the next step in protecting and restoring your credit report.
Step 3: Add an Extended Fraud Victim Alert
Once you have filed a police report, you can contact the credit reporting agency to ask that an Extended Fraud Victim Alert be placed on your credit file.
An Extended Fraud Victim Alert, also called a victim statement, remains on your credit report for seven years. It tells creditors that you are a fraud victim and asks that they contact you at a telephone number you specify before granting credit.
If your phone number changes, you should contact the credit reporting agency to provide them with the new number. You may be asked to provide proof of your new phone number.
Additionally, when you request the Extended Fraud Victim Alert, Experian will:
- Remove your name from prescreened credit solicitation lists for five years.
- Provide up to two complimentary credit reports within 12 months after you request the alert. Some state laws allow for additional credit reports.
- Notify the other nationwide consumer credit reporting companies that you requested an Extended Fraud Victim Alert. Equifax and TransUnion then will add similar alerts to their files.
The exact steps taken at the other national credit reporting agencies may differ. Contact Equifax and TransUnion for details on the actions they take when adding an Initial Fraud Alert or Extended Fraud Victim Alert.
Having a security alert or victim statement should not interfere with your daily use of a credit card or other bank accounts. However, if you try to open an instant credit account, your application may be delayed because of the extra steps needed to verify your identity and prevent fraud.
Step 4: Dispute the Fraudulent Credit Information
Your credit report will include instructions to dispute any fraudulent information, as well as contact details to help you notify creditors to remove fraudulent accounts from their records.
You can dispute fraudulent information in your credit report online at www.experian.com/fraud. You can also upload a copy of the identity theft report filed with law enforcement.
After submitting your disputes, the credit reporting agency will:
- Block any information in your credit file that resulted from alleged identity theft. This will occur after you supply appropriate proof of identity, a copy of a valid Identity Theft Report, identification of the specific disputed information and a statement that the information is not related to a transaction you made.
- Notify the sources of the alleged fraudulent items.
- Complete an investigation of the fraudulent information. If the source of the information cannot verify it as accurate, Experian will update or delete the information and prevent reappearance of the information you disputed. The sources of the information have 30 days to respond to the dispute. Information can be returned to the credit report as allowed by law if the creditor later certifies that the information was correct as reported.
Step 5: Notify Creditors and Other Nationwide Credit Reporting Companies
When you dispute information as fraudulent, the credit reporting agency will contact the creditor and notify them of your dispute. If you provide a valid Identity Theft Report and the disputed information is deleted or blocked, the credit reporting agency will notify the creditor.
The Fair and Accurate Credit Transactions Act (FACT Act) requires creditors to take steps to prevent fraudulent information from being reported again.
The credit reporting agency will also notify the other credit reporting companies when fraudulent information is blocked from your credit report.
Step 6: Rebuilding Credit After Fraud
If your credit has suffered as a result of identity theft or fraud, you’ll want to make sure any fraudulent items have been removed from your credit report.
After you file a police report and notify both the credit reporting agencies and the creditors involved, you will be able to restore your credit report and remove any fraudulent accounts or activity.
To build an even stronger credit history going forward, open a Wards credit account. If you manage your account well, your new Wards account can help you increase your credit scores and build a solid credit history for your future.