Credit fraud is a serious and growing problem that can have devastating consequences for victims. It occurs when someone illegally uses another person’s credit card, account numbers, or other personal information to make unauthorized purchases or obtain loans and lines of credit.
The Effects of Credit Fraud
Credit fraud can wreak havoc on your finances and creditworthiness. Fraudulent charges on your existing accounts can quickly rack up debts that damage your credit score. New accounts opened in your name by criminals add further delinquencies that make recovering your good credit extremely difficult. Cleaning up the mess can take months or even years of arduous work.
Beyond the financial fallout, credit fraud often causes immense stress, anger and feelings of violation for victims. Having your identity and creditworthiness literally stolen is a deeply unsettling experience. The impact on your mental health shouldn’t be underestimated.
How Credit Fraud Occurs
There are various ways that fraudsters can obtain your personal and financial information to commit credit fraud:
- Stealing your wallet or mail containing credit card statements
- Hacking into databases that store consumer records
- Skimming devices that copy credit card information
- Phishing scams that trick you into providing sensitive data
- Malware that logs your keystrokes and passwords
Protecting Yourself from Credit Fraud
While businesses and financial institutions have a responsibility to safeguard customer data, consumers must also take preventative measures:
- Shred receipts, statements and sensitive documents before disposal
- Don’t share personal information over the phone, email or text unless you initiated contact
- Use strong, unique passwords and update them regularly
- Check your credit reports annually to spot unauthorized activity
- Consider a credit freeze or fraud alert with major credit bureaus
Tips for Travelers:
When traveling, you’re at increased risk for credit fraud and identity theft. Take extra precautions like:
- Use credit cards instead of debit cards which are harder to recover fraudulent charges on
- Avoid using public WiFi for financial transactions
- Password protect your devices and accounts
- Only carry essential ID, cards and documents
- Keep valuables safely locked away when not in use
- Promptly report any lost or stolen cards/IDs
If you suspect your identity has been compromised, act quickly. Contact your bank and major credit bureaus immediately to dispute fraudulent transactions and accounts. You may also need to file reports with your local police and the FTC.
Credit fraud is a growing crime that demands vigilance from both consumers and businesses. By understanding the risks and taking proper precautions, you can greatly reduce your chances of becoming the next victim.
If you get a Social Security Number (SSN) trace alert, it means that someone may have tried to use your Social Security number to open a new line of credit or account. This could be an indication of attempted identity theft or credit fraud. Here are some steps you should take:
- Place a credit freeze with the three major credit reporting agencies – Equifax, Experian and TransUnion. A credit freeze restricts access to your credit report, making it much harder for fraudsters to open new accounts in your name.
A credit freeze, also known as a security freeze, allows you to seal your credit reports at the three nationwide credit bureaus. This prevents lenders from accessing your credit report, which they need to approve applications. Without the ability to check your report, most companies won’t approve new credit in your name.
To place a freeze, you need to contact each credit bureau individually. They will assign you a personal identification number (PIN) that you can use to temporarily lift the freeze when you need to apply for new credit yourself.
- Check your credit reports from all three bureaus for any unauthorized accounts or activity. You can get free annual reports from www.annualcreditreport.com.
- Report the SSN trace alert and any fraudulent activity to the credit bureaus and Federal Trade Commission to launch an investigation.
- Consider placing a free renewable fraud alert on your credit report. This requires lenders to verify your identity before opening new accounts.
- Monitor your credit reports regularly for any further signs of fraud and report anything suspicious promptly.
The three major credit reporting agencies in the U.S. are:
- Equifax – www.equifax.com
- Experian – www.experian.com
- TransUnion – www.transunion.com
These agencies collect information about your bill payments, credit accounts, bankruptcy filings and other data to calculate credit scores that lenders use. If fraud occurs on one of your credit reports, it will likely appear on reports from the other bureaus as well since they share data.
Placing a credit freeze with all three credit bureaus is one of the strongest ways to prevent new account fraud since it blocks access to your reports entirely until you temporarily lift or remove the freeze. This makes it difficult for criminals to open credit in your name even if they have your SSN or other personal details.
