Most of us have seen the clever Citibank commercials that portray identity theft victims boasting about illegal purchases with dubbed voices that are clearly not their own. While entertaining and just plain funny, these ads have also helped raise consumer awareness of the real dangers associated with identity theft and credit-card fraud.
Unlike victims of a home invasion or a purse-snatching, victims of identity theft may never see the actual criminal or even have knowledge of the theft for months or years to come. This is what makes identity theft so insidious and serious. It is often undetectable, leaving a silent mess of fraudulent debts, credit accounts, and even illegal activities that will one day catch up with a surprised and shocked victim. Fortunately, it doesn't have to be this way. As a consumer with credit history, there are many methods you can use to detect identity theft in the early stages and mitigate the damages. One of the most important is to regularly order and check your credit report.
What is a credit report?
A credit report is a record of all credit activities associated with your name. It will list all the financial accounts you have ever had including– credit cards, store credit, loans, mortgages, and even the number of times your report has been accessed by lenders. It also lists the balance on each account and records if payments were made late or on time. In addition, it will list any actions taken against you by a credit issuer for non-payment on an account.
All this information is then summarized and computed as a credit score (this number is not included on your report.) If you have never missed payments, always paid balances off in full, have a good ratio of credit versus debt, and have generally been responsible with your credit, you will likely have a high score. The more late payments, charge-offs, or actions that have been taken against you, the lower your score will be.
Having a high credit score allows you to not only gain easier access to more credit, but also under more favorable terms, which can save you thousands of dollars in finance charges. Conversely, having a low credit score will make things more difficult with every part of your financial life. It will affect your ability to obtain more credit, rent an apartment, buy insurance at a good price, or even gain employment. Landlords and potential employers will see you as being less than responsible with your finances, and thus they will second-guess your reliability in all areas of life. Likewise, lenders will see you as more at risk of defaulting on your loans, and so they will deny additional requests for credit, or at the very least, you will be charged a much higher rate of interest. As you can see, your credit report and credit score impacts your life much more than you may realize. And if an identity thief has been silently living off your credit, you can be certain that it will come back to haunt you at some point in the future.
You are actually allowed one free credit report every year from each of the three major reporting bureaus. You can order your free reports at Annualcreditreport.com. You can also contact each agency directly at Experian, Equifax, and TransUnion. Each reporting agency records your information differently, so it is important to order credit report from all three. A good strategy is to not order them all at once, but order from each bureau every four months. This way, you can monitor your credit more frequently for signs of unauthorized changes.
If you don't wish to go through this hassle every few months, you can also subscribe to a credit monitoring or identity theft protection service, such as Lifelock or TrustedID. This way, you will be notified if there is ever a material change in any of your credit reports. You will also have proactive "locks" at your disposal, such as placing alerts or even freezes on your credit.
How do I know if I'm a Victim of Identity Theft?
Once you obtain your credit reports, go over each account in detail to check for errors. The first section of your credit report will provide your identifying information: full name and any other names you have used, such as your maiden name, current and previous addresses, social security number, birth date, and employers (current and past). It is particularly important to verify all addresses, names, and places of employment. You might briefly scan the report and miss an extra address at which you never lived, so make sure you take your time and read carefully. Discrepancies such as this could be a sign that someone else has been using your information. For example, Identity thieves living under your identity will often change your address so you never receive financial statements for accounts they illegally opened or letters from collection agencies demanding payment.
The next section of your credit report will not only include your current credit-related accounts, but also your past accounts. The list will likely include bank accounts, retailers, credit-card issuers, utility companies, and any other lenders. The accounts will be listed by type of loan, such as a mortgage, student loan, revolving credit, or installment loan. It will also include the date you opened the account, your credit limit or the loan amount, any co-signers of the loan, and your payment pattern. This is the most important area to carefully monitor. Make certain you indeed have had accounts with all the listed lenders and companies. A criminal doesn't have to change your address to still rack up amounts owed in accounts you never opened. You should keep a record of all statements over the past two years to compare against your credit report.
The last section will include a list of those businesses that have made inquiries regarding your credit. When buying a car, renting an apartment or applying for a loan, the potential lender will access your credit report. Take note of any inquiries from lenders you did not authorize - it could mean someone is trying to gain credit in your name. Remember that multiple inquiries in a short period of time can also lower your score –regardless of whether credit is given or not.
Likewise, be aware that some less-than-reputable lenders may not check your credit report before issuing credit. They will simply take a customer at face value and issue a loan. This is the one weakness in monitoring your credit reports - it is only effective if all lenders follow the same rules. Though this unsecure practice is becoming more uncommon (due to a greater awareness of identity theft and the economic downturn), if a thief using your name successfully gains a loan from such a lender, it will not be correctly reported. This is how one thief managed to gain a loan using the identity of Todd Davis, CEO of Lifelock. To be fair, he uses his Social Security Number in national advertising campaigns, daring criminals to steal his identity - something you yourself should definitely not do!
What to do if I find a discrepancy on my credit report?
f you find errors, unauthorized accounts, or strange credit checks, contact the consumer credit reporting agency immediately. You can do this online, by phone, or by mail. Errors happen, so it does not mean that your identity has been stolen. However, this should be resolved as soon as possible. The credit reporting company is then responsible for researching and proving that it was indeed your actions that created the account or change you are disputing. This process could take as long as 45 days. If you request it, a corrected report will be sent to those parties who have received your report within the past six months, or employers who have received it within the last two years.
If the credit reporting agency does not feel there is an error, you can then send a hand-written statement expressing the details of the inaccuracy. A copy of that statement will be included with your credit report when a lender or prospective employer views it. In cases of identity theft, you can usually present enough evidence that the debt is not yours. It can take a lot of foot work on your part tracking down signature pages, locating store,s and calling creditors. However, the sooner you locate the fraudulent activity, the easier it is to refute the debt.
Finally, file a report with your local law enforcement, the Federal Trade Commission (1-877-id-theft), and the FBI. An alert will be placed on your credit reports indicating that you have been an identity theft victim, and all future requests for credit will require extra identification, such as a verbal agreement using your indicated phone number.
Identity theft is an uncomfortable and messy business, not to mention emotionally devastating. However, monitoring your credit reports on a regular basis will not only help you catch identity theft in the early stages, but it is also a vital component to keeping your life and personal finances secure.
