Identity theft is a crime that occurs when someone steals your personal information and uses it without your permission, sometimes to apply for new credit in your name. This type of fraud has the potential to rob you of your time, your money, and inflict damage to your credit scores. So, what are the three best ways to protect your identity?
Unfortunately, identity theft is a growing problem in the United States. According to the Federal Trade Commission (FTC), some 1.4 million U.S. consumers filed identity theft reports in 2020. Because identity theft is such a common crime, it’s important that you take appropriate steps to safeguard your information. You can’t stop criminals from hacking databases and stealing your personal data. But, you can limit what fraudsters can do with your information if they steal it.
The Fair Credit Reporting Act, or FCRA, gives you several protections where identity theft is concerned. One of the rights the FCRA confers to you is the ability to place fraud alerts on your three credit reports with Experian, TransUnion, and Equifax.
A fraud alert requires that lenders take reasonable steps to verify your identity and that it is, in fact, you who is applying for credit and not someone trying to open a fraudulent account in your name. With a fraud alert in place, the lender must get your authorization prior to extending new credit.
There are two types of fraud alerts:
It’s important to review your credit reports from all three credit bureaus frequently. One of the reasons why you want to develop this good habit is because monitoring your credit reports can help you spot signs of identity theft as soon as possible. Monitoring can be done manually, by pulling your credit reports at www.AnnualCreditReport.com, or automatically by subscribing to a tri-bureau credit monitoring service.
Some red flags you’ll want to watch for when you review your credit reports include:
Should you discover signs of identity theft on your credit reports, such as accounts you didn’t open, the FCRA protects you. You can send dispute letters along with a copy of an FTC Identity Theft Report or police report to the appropriate credit reporting agencies. Once you send this notice to a credit bureau, it must block the fraudulent account(s) from your credit report within four business days and send other “block” notices to the other credit bureaus.
I’ve gone on record countless times indicating that the credit/security is the most effective way to protect your credit from fraudsters. Placing a security freeze on your three credit reports essentially takes them out of circulation and prevents the credit bureaus from delivering them to any lender with whom you do not have an already established relationship.
Practically speaking, after freezing your reports lenders won’t be able to access your them without your permission. So, illegitimate credit applications are stopped in their tracks. In fact, even you will need to temporarily remove the credit freeze or “thaw” your credit prior to applying for any new legitimate financing.
Like fraud alerts and some credit monitoring services, placing credit freezes on your reports is also free. However, unlike fraud alerts you will need to contact each credit bureau individually anytime you wish to freeze or thaw your credit reports.
Building good credit is already hard enough. You don’t need fraudsters derailing your attempts to maintain solid credit reports and scores. Protect your credit reports and credit scores by considering one or more of the above steps so that you can confidently rely upon them when the time comes.