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Credit Protection: Identity Theft Guide

Identity theft is a silent killer when it comes to the financial well-being of those who fall victim to this crime. The United States Department of Justice estimates that there were 5.5 million cases of identity theft in 2010. Because this crime typically goes undetected for months or years, however, it is hard to tell exactly how many victims there really are. This crime cost over $13 billion in the same year and the average losses were $2,200 per victim, which doesn’t count the months or years that one must spend in order to recover their good name. The most common ways that thieves steal their victims’ identities include hacking, social engineering, inside jobs, and stealing paperwork from dumpsters and mailboxes.

Identity Theft

When a criminal unlawfully obtains information about the identity of another person and impersonates them, it is called identity theft. Identity theft is a Federal crime whether or not it results in financial harm to the victim. The punishment for those who are caught can be as high as 15 years in prison, along with the seizure of their unlawfully gained assets. Identity theft often includes a number of other separately punishable crimes, including credit fraud, mail fraud and wire fraud. The problem with identity theft is that it sometimes goes on for months without anyone finding out about it. This is because it often takes months or years for the adverse effects upon one’s credit or financial standing to show up. For instance, if a criminal has opened up a new credit card in their victim’s name, the affected person might not notice until months later, when they are denied for a loan or they’re approached by a bill collector for a debt that they did incur. The stealthy nature of identity theft is why it is considered a silent financial killer.

Identity theft involves acquiring significant elements of a person’s identifying information. This includes one’s credit card numbers, Social Security number (SSN), phone number, address, and various passwords or access codes. Thieves hunt for personal information by breaking into computer databases, using viruses that steal information from computers, taking paperwork from trash cans and garbage bins (also known as “dumpster diving”), and stealing from mailboxes. Identity theft can also be committed by insiders, which includes employees, trusted friends or family members. In addition, many people fall victim to social engineering tactics, in which they are tricked into voluntarily giving their personal information to thieves. Any time a thief steals someone’s wallet, takes a car, or breaks into someone’s home, there is a chance that they may take or copy personal information to commit identity theft.

Types of Identity Theft

The most common type of identity theft is credit fraud, which involves using a victim’s personal information to open a new credit card or other type of loan, like a home loan or a car loan. It is a favorite tactic used not only by common thieves, but also by terrorists seeking illicit funding for their activities. For instance, Khalid Sheikh Mohammad, an al Qaeda operative and financier of the September 11, 2001 attacks, was caught by the authorities with over a thousand stolen credit card numbers, all the result of identity theft. Another common type is financial account fraud, in which they pilfer existing bank accounts, or open new ones in someone else’s name. Another common type of identity theft is medical fraud, in which a criminal uses another person’s identity to obtain medical care, passing on the cost to their victim. It is also common for identity thieves to obtain jobs using a false identity. This will result in tax issues that their victim will have to deal with. Business fraud is a common form of identity theft in which the target is a business rather than a person.

Detecting Identity Theft

The best approach to detecting identity theft is to be proactive. In many cases victims don’t discover any warning signs until they are being contacted by bill collectors or tax authorities such as the Internal Revenue Service (IRS). The most effective proactive tactic for fighting this type of crime is to periodically obtain a credit report from each of the major consumer credit reporting agencies, which are known as TransUnion, Equifax and Experian. The most reputable source for obtaining all three credit reports at once is the Annual Credit Report website, the only one that is endorsed by the United States Government. All citizens of the United States are guaranteed one free report from all three agencies per year, under the Fair Credit Reporting Act (FCRA). Credit reports should be acquired and monitored for any type of strange activity, such as attempts to acquire rent, loans, or unknown bank accounts.

In addition to monitoring one’s credit report, there are other ways to detect acts of identity theft. If there are unknown transactions on a credit card or bank account, this is a sign of theft in progress. Bills that no longer arrive, or credit cards that one didn’t apply for, are other red flags. If a person is denied a line of credit or a loan, they have the right to request full credit reports under the FCRA, which may help detect instances of identity theft.

Preventing Identity Theft

While there is no perfect way to prevent crime, including identity theft, there are methods by which people can reduce their risk of becoming a victim. One critical step is to prevent unauthorized access to one’s SSN. Ask to use alternatives whenever a bank or other service traditionally uses SSN’s as identifying information. SSN’s should never be carried in one’s wallet, but rather, stored in a secure location. Passwords for ATMs, credit cards, wireless access, and Internet websites, should be as long and complex as possible. People should never use unsecured wireless access points, since thieves can easily steal any information that is transmitted. All documents with identifying information should be shredded, ideally by using a cross-cut shredder. If possible, a homeowner should have a mailbox that is secured by a lock. Do not answer emails that ask for personal information. If asked for passwords or other information, contact the company or government agency directly. To prevent thieves from stealing personal information from credit reports, it is advisable to freeze one’s credit. This is done by getting in contact with the major credit bureaus and requesting a credit freeze. A credit freeze will stop most people and companies from obtaining one’s credit report. In addition, pre-approved credit card offers are potential targets for identity thieves. Potential identity thieves can be stopped by opting out of these offers.

Reporting and Restoring

Despite taking all the steps that can be taken to prevent identity theft, it is still possible to become a victim. The first step in responding to identity theft is to place a fraud alert with one of the three credit reporting agencies, which will propagate to all three agencies. By law, a fraud alert makes one eligible to obtain a free copy of their credit reports, which should be kept in a safe place. Any accounts that have been compromised should be closed down immediately, along with those that have been fraudulently opened. All email conversations with bill collectors and financial institutions should be preserved, as well as transaction records. Letters to financial institutions and other entities should be sent by certified mail, and return receipts should always be requested. At the same time, a complaint should be filed with the Federal Trade Commission and local law enforcement agencies. It may also be necessary to obtain new identifying documents, such as a new SSN, which can be acquired from the Social Security Administration.

Agencies That Can Help

There are a number of agencies that offer help for victims of identity theft. The Social Security Administration can provide new SSN’s in the most severe cases of fraud, and the IRS deals with tax fraud issues. The Federal Trade Commission handles these cases on a nationwide level. Each of the three major credit bureaus are required by law to assist with restricting access to credit information and also removing adverse information that is the result of identity theft.

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