Part I: What you don’t know can hurt you. Someone wants your identity — and that person wants it desperately enough to steal your wallet, hack into a company’s database, take your checkbook or buy your information from a trader on the Internet. If this knowledge makes you nervous, it should. Once your information is in their hands, criminals can assume your identity and use it for their own financial gain, taking over your credit accounts, opening new ones, making new loans, renting an apartment, filing for your benefits, accessing your bank accounts or committing other crimes. Arguably one of the country’s fastest growing forms of larceny, identity theft is likely to have touched you or someone you know already. In a 2004 report, the Federal Trade Commission estimated that 9.9 million Americans — about 4.6 percent of the population — had their identity hijacked in 2002 alone. More recent studies suggest that as many as one in five of all Americans has been hit by identity theft. And the news doesn’t seem to be getting any better. A rash of highprofile security breaches during 2005 put millions of Americans on notice that they could be next. In one of the most widely publicized incidents, CardSystems Solutions, a third-party credit card processor, put more than 40 million Visa and MasterCard holders at risk of fraud when its Tucson, Ariz., database was compromised. Security problems reported by other companies such as Wells Fargo, CitiBank, Bank of America, Time Warner and ChoicePoint have left most of us wondering why we are so vulnerable to this new crime wave.
WHAT’S THE PROBLEM?
The answer is rooted in new technologies that businesses depend on to collect, process and trade data so they can handle millions of transactions quickly and easily, and in the growing use of instant credit to make purchases. Unfortunately, safeguards and regulations designed to protect this precious data have not kept pace with technology. The result is more personal information than ever before in circulation, too little protection for it and a growing number of savvy criminals getting better and better at figuring out how to get their hands on it. Smart identity thieves know that the right pieces of personal information are as good as money in their pockets. Today, it is not only possible but easy to walk into a store with no money, apply for instant credit and walk out with thousands of dollars of merchandise or services. That, in the final analysis, is why identity thieves will stop at nothing to take what is most fundamentally yours — your identity. But criminals also want your identity for more than buying expensive merchandise or personal services. They can use your data to open telephone and utility accounts; apply for a mortgage loan; get a new job; file a bogus insurance claim; commit tax, healthcare or securities fraud; and carry out a host of other equally damaging crimes.
CAN YOU PROTECT YOURSELF?
If you’re already thinking about how you can protect yourself against identity theft, you’re headed in the right direction. With so many of us vulnerable to the wiles of identity thieves, it’s valuable to understand what we can do for ourselves to keep them out of our pocketbooks and our bank accounts. .First, recognize that you are likely to detect an identity thief’s dirty work before your bank or a credit issuer does. Even though many companies are increasingly sophisticated when it comes to fraud detection, according to a 2005 study co-released by Javelin Strategy & Research and the Better Business Bureau, victims are the first to discover such fraud 54 percent of the time.
And if you manage your personal finances online, you are more likely to find fraud sooner than if you review financial statements on paper. The 2005 study showed that those who monitored their finances electronically detected fraud in just eight days compared with 114 days for those who reviewed their finances on paper. That is particularly important because when it comes to identity theft, time equals money. The faster you uncover fraudulent activity, the less time and money you will spend to repair the damage done by thieves. And with the average identity theft victim spending 600 hours and potentially thousands of dollars to clear up credit and other problems, the savings can be enormous.
All of this may have you ready to fight back, but first you must know how to recognize when you have been victimized.
WHAT SHOULD YOU LOOK FOR?
How will you know if you are a victim of identity theft? MyFico.com, the consumer division of the company that invented the FICO credit risk score, offers these common “red flags” that could signal a potential problem.
• You receive unexpected phone calls from creditors. A call from a creditor demanding payment for a purchase that no one in your family made should suggest the possibility of identity fraud.
• You see credit card charges on your statement that were not made by you or your family. To find these problems quickly, save all receipts and reconcile statements each month.
• You are turned down for credit unexpectedly. Monitor your credit reports regularly to ensure that no one is using your credit fraudulently.
• Your account usernames and passwords or your ATM PINs stop working. This indicator may suggest that a thief has changed your access codes.
• You do not receive bills from creditors that you owe. If bills you expect stop arriving, an identity thief may have changed your address to use bank accounts and other accounts without raising suspicion.
• You find strange or incorrect information in your credit files. Regular monitoring of your personal credit report from the three major credit bureaus can uncover honest mistakes or something more sinister, such as identity theft.
Next Issue: Grand theft identity – Part II: Protection and damage control
FIRST STEP IN FIGHTING BACK:
Look at your credit report — for free
Among the most effective precautions you can take to safeguard your identity and your credit reputation is monitoring your credit report on a regular basis. The report’s importance to you is obvious: it includes information about where you live, how you pay your bills, and whether you have been sued, arrested or filed bankruptcy. Lenders, employers, insurers and others use the reports to make critical business decisions about you. Until recently, you were required to pay fees — as much as $9.95 and up — to each of the three major credit reporting bureaus — TransUnion, Experian and Equifax — to see the information that each included in its report on you. (The three credit companies get their information from different sources so the reports from each are likely to vary.) Now, the Fair and Accurate Credit Transactions Act of 2003 (FACTA) entitles you to receive a free copy of your credit report every 12 months from each of the three bureaus.
But there is a catch: reports are not sent to you automatically. You must request them in one of three ways: log on to www.annualcreditreport.com, the only authorized online source for consumers to request a free annual credit report; call toll free 877-322-8228; complete the form on the back of the “Annual Credit Report Request” brochure, available from the FTC (www.ftc.gov), and mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, Ga., 30348-5281. You may order reports from all three credit reporting bureaus at one time, at different times during the year. Financial advisers suggest staggering your requests throughout the year as a constant monitor on the accuracy and completeness of your credit information. Be sure to order from the centralized resource. If you order directly from credit bureaus, you will be charged a fee unless you meet other criteria for a free report.
The new program does not replace other opportunities to receive a free report. You are entitled to a free credit report if you have been denied a loan, insurance policy or job based on your credit report; if you are applying for unemployment or receive public assistance; if you are the victim of credit fraud, especially identity theft; or if you live in one of seven states with laws that already give you access to free annual credit reports.
By JUDY ALEXANDER