Identity theft is one of the scary realities of our world these days. It can destroy your financial life: Your bank account can be drained, your credit cards can be used, new accounts can be opened — all without your consent.
Whether you’ve personally experienced identity theft or you just want to know how to prevent it from happening to you, this guide has the steps you need to know.
Table of Contents:
What Is Identity Theft?
Identity theft is when someone uses your personal information, without your permission, to commit a crime — usually fraud. It is a serious crime that could ruin your financial life.
Here’s the kind of information ID thieves look for to steal your identity:
- Date of birth
- Social Security number
- Driver’s license number
- Credit card and/or bank account numbers
- Medical insurance account numbers
- Credit reports
So how do they get hold of this information? There are several ways. Some of them are high-tech. And some are extremely low tech, such as going through your garbage or your mailbox.
Crooks can also swipe your information from a job application, your email, or even from what you post on social media.
There’s a technique called “shoulder surfing”: A potential thief watches you enter your credit card number or other personal information into a keypad, according to the U.S. Justice Department.
“Skimming” is another ID theft technique related to your use of keypads (usually at ATMs). Crooks attach their own card readers over the real card reader and then take the information off every card that gets swiped.
And, of course, your computer or phone can get hacked — especially if you don’t have any security software installed.
How To Prevent Identity Theft
There are many things you can do to help protect yourself from identity theft.
Money expert Clark Howard says there’s one thing you should do first:
He says it’s crucial to freeze your credit with the three major credit bureaus: Experian, Equifax and TransUnion. And it doesn’t cost anything to get your credit frozen.
Once your credit is frozen, no one can open a new financial account in your name. You have to contact each credit bureau and confirm your identity to “thaw” or unfreeze your credit before you open any new accounts.
Here are a few more ways to prevent identity theft:
How To Report Identity Theft
If your ID does get stolen, you can report it several different places.
You’ll typically need to inform the Social Security Administration, the credit bureaus, your local police department, your bank and all creditors with whom you have accounts that have been affected.
Some companies and agencies have pages on their websites where you can make a report. Other times, you’ll need to call.
In each case you may be asked to describe the incident to the best of your knowledge. Remember to stay calm and try to give full descriptions of charges and discrepancies in your account(s) that you’ve noticed.
It’s helpful to have a pen and pad (or a computer) nearby to take notes.
Here are details on how to make some of those contacts:
Contact the Social Security Administration
If your Social Security number has been stolen, contact the Social Security Administration Fraud Hotline at 800-269-0271.
Contact the Credit Bureaus
You can ask the three major U.S. credit bureaus to put a fraud alert on your account.
Here are links and phone numbers to contact them:
Clark says you should also ask to add a what’s called a “victim’s statement” to your account, which should say the following:
”My identification has been used to fraudulently apply for credit. Call me at this number to verify all applications.”
Find out from the credit bureaus how long they will keep the fraud alert active and how to extend it if you need to.
File a Police Report
You may also choose to contact your local police department. If you do so in writing, make sure to mail it via Certified Mail.
If you choose to file a report in person, you should take the following items with you:
- A photo ID
- Proof of address
- Evidence of ID theft (bills, account balances, marks on your credit report, etc.)
A police report that has details about the case can serve as an official “Identity Theft Report,” according to the FTC, and that’s a document that will help you when you start to try to repair the damage the ID thieves have done.
Contact Your Creditors
You need to reach out to all the affected creditors so that they can close your account(s).
Once you explain the situation and provide them a copy of the Identity Theft Report, here’s where you can begin the process of contesting any charges.
How To Repair Your Finances After Identity Theft
Clark does not suggest hiring a credit repair service. These companies usually promise astronomical surges in your credit score, but some of their techniques may not be ethical.
Instead, he suggests you contact the National Foundation for Credit Counseling for targeted advice based on your situation.
Also, make sure you follow up with these parties:
Credit bureaus: Ask for written confirmation from the credit bureaus that the fraudulent charges have been removed. This may take a while. To track their progress, you can check your credit report for free every week.
Creditors: Change your passwords, PINs and other security information associated with your accounts.
Clark also says to make sure that, as you get new cards and deactivate old accounts, you get a memo from each company stating that the account has been closed at the customer’s request. Ask for written confirmation.
Authorities: If the case is big enough, and if the authorities find the crook, you may be asked if you want to press charges. While that is a personal decision, restitution from the offender is one potential way to get compensation for your losses.
Rectifying an incident of identity theft is not a quick process, so it pays to a) be patient and b) keep comprehensive notes on everything.
One Team Clark member who had her identity stolen says this: “Hopefully, you will never experience the feelings of violation and vulnerability that go hand-in-hand with identity theft. But if you do, know that it is going to be a very time-consuming, frustrating and emotional journey. However, the sooner you act, the less complicated that it’s going to be.”
Once you’ve made the necessary reports and provided any requested documentation, remember to:
- Review your bank account often
- Check your credit report weekly
- Freeze your credit
Remember, you can help protect your identity and your finances by taking preventive steps and following safe security measures.
More Resources From Clark.com:
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How to improve your credit score in 2021: Easy and effective tips
If you’ve ever wondered “What is my credit score?” it’s probably time to find out. Having a good credit score can make life a lot more affordable. If you’re about to buy a house or car, for example, the higher your credit score is, the lower your interest rate (and therefore, monthly cost) will probably be.
Your number may also be the deciding factor for whether or not you can get a loan and ultimately determine if you are even able to buy something you want or need.
So, yes, the goal is to have the highest possible credit score you can, but increasing the number doesn’t just happen overnight. There are important steps to take if you want to increase your score, and the sooner you start working on it, the better.
“If you’re trying to increase (your credit score) substantially to accomplish a goal, you’re really going to have to have as much lead time as possible,” said Thomas Nitzsche, director of media and brand at Money Management International, a nonprofit financial counseling and education provider that advises people on how to legally and ethically improve their credit score on their own.
If you have fair credit and you’re trying to improve the number for a house purchase, for instance, you’ll want to start working on it at least a year in advance, he explained to TMRW.
But even though that sounds like a long time away, you can (and should!) start doing things right now to bump that number up. Below, see seven things you should do — and not do — to help improve your credit score:
1. Review your credit report
The first thing you’ll want to do is pull up a copy of your current report so you know where you stand. You can get free reports from all three agencies — TransUnion, Experian, and Equifax — at annualcreditreport.com. Nitzsche said it’s important to take a moment and understand the financial snapshot of where you are today and where you want to be.
You’ll also want to take some time and look for any errors on your report, which could negatively impact your score. “If your name is misspelled, that’s not going to hurt your score,” he explained. “But if you see a late payment or missed payment (that’s in error), or maybe you have an account that should be reporting but isn’t, then that’s a problem and that will impact your score.”
If there is an error, you should dispute it and try to provide as much proof as you can.
One other thing: You can also ask a creditor to remove an issue if it’s been corrected (i.e., if you paid off a collection debt). Nitzsche said it doesn’t hurt to ask and the worst thing they could say is no.
2. Have good financial habits
“The biggest part of your credit score is payment history, so the most critical thing is never missing a due date,” Nitzsche said. Set up a monthly autopay or add all due dates to your calendar so you never miss a bill.
You can also achieve a higher score when you mix different types of accounts on your credit report. It may seem counterintuitive to get extra points for having debt in the form of student loans, mortgages and auto loans, but as long as you’re paying them off responsibly, it shows that you’re reliable.
3. Aim to use 30% or less of your credit at any given time
Know your credit card limit, and try not to use any more than 30% of that number each month, otherwise your score could lose points for too much credit utilization.
Another thing you can do is ask your bank to increase your limit. “That will give you more flexibility to spend more,” Nitzsche said. You could also pay it off twice a month to keep the balance low. But he does warn that you never know when the balance is going to be reported to the bureau. It can happen at any point during the month, so it might be the day after you make the payment or the day before. “You don’t necessarily want to use the card and pay it the next day because that doesn’t give the bureau the chance to know that you’re using it,” he said.
4. Avoid requests for new credit
If you’re looking to increase your score around the time you want to buy a house or car, you won’t want to open up a new line of credit, like a retail card, credit card or loan. That’s because “hard” credit inquiries like those can lower your score, and sometimes it comes down to a few points over whether you’re approved or what your rate will be, Nitzsche said.
“Soft” credit inquiries, like when an employer checks your credit or when you pull your own report, won’t affect your score.
5. Keep all accounts open, even ones you don’t use anymore
Even if you don’t use that credit card from college, it’s a good idea to just keep it open because closing it could hurt your score. Nitzsche explained that you’ll be dinged some points for each account that is closed. If you want or need to mentally break up with a card, just cut it up instead.
6. Build your credit if needed
If you haven’t established credit yet, you might not even exist … in the credit report space, that is! “If someone has never fallen in delinquency on any subscriptions or utilities or never had collections on anything and they have not utilized credit cards or loans in the past seven to 10 years, they may not have a credit profile at all,” Nitzsche said. “That presents a challenge when you want to buy a home.”
If this sounds familiar, you may have to get a secured credit card where you put down a deposit, he advised. “You still have to make payments and use it responsibly. Not all banks offer them but you can usually check with your local bank or credit union.”
7. Reach out for help
There are many apps and credit-monitoring services that can help you stay on top of your credit score. You could also reach out to a professional credit counselor who can help you navigate your specific situation. (Here’s a good resource about finding a reputable service.)
One last thing: Nitzsche warned that everyone should beware of credit repair scams that claim to be able to increase credit scores for an advance fee to get accurate negative information removed (even temporarily) from credit reports.
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