A credit report freeze is an effective tool in preventing one of the most costly and difficult-to-detect forms of identity theft – false new accounts opened in your name. New account fraud occurs when a thief uses your personal information to open up one or more new accounts for credit or services in your name. You’ll never see the bills, since they’re probably being sent elsewhere – so you’ll only learn of the new account when you find out that you have a bad credit score, or when you begin receiving calls or letters from debt collectors.
Before opening a new account, most reputable companies evaluate your creditworthiness by checking your credit report or credit score. A security freeze stops potential creditors from seeing your credit report and credit score unless you decide to unlock the credit reporting file with a PIN. The freeze stops the new account in the name of a thief because the creditor who is considering the thief’s application can’t check your credit report or credit score.
BUNK ALERT: A security freeze does NOT stop misuse by a thief of your existing bank account or credit accounts, which is called existing account fraud. You still have to check the monthly statements on your existing accounts for any erroneous charges or debits.
The procedures you must follow to place a Security Freeze on your credit records vary by state. Click here for a list of instructions by state.
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1. Victims rarely (if ever) know what hit them.
It takes an average of 14 months before victims discover that their identity has been stolen to commit a crime.
• Victims are not liable for fraudulent charges/debts accumulated by identity thieves, due to Federal law. Still, banks and credit card companies regularly turn bad accounts over to collection agencies, and continue to report erroneous information on credit reports – even though they know the accounts are fraudulent and all collection and reporting activity should stop.
• Because fraudulent accounts make up such a large “overhead” expense, banks and credit card companies often hope that victims will eventually collapse under the onslaught of bills and collection agencies and eventually pay for items they never purchased in the first place – simply to restore/protect their good names. (Identity Theft Resource Center)
• The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies — Equifax, Experian and TransUnion— to provide you with a free copy of your credit report, at your request, once every 12 months. The Federal Trade Commission, the nation’s consumer protection agency, enforces the FCRA with respect to consumer reporting companies. (FTC.gov)
2. Once the thief has your information, they have lots of options.
Over half of identity theft victims who call the FTC Identity Theft Hotline report that their identity has been used illegally in multiple ways:
- Credit card fraud – a card is opened in the victim’s name, or unauthorized charges are made on an existing card. (Represents over 50% of victims who file reports with the FTC)
- Unauthorized phone or utility services – victim has a fraudulent new utility account (cell phones included), or perpetrator has accessed an existing account.
- Bank fraud – bank account is opened in the victim’s name, or withdrawals are made from their existing account.
- Fraudulent loans – obtained in the victim’s name (personal, business, auto, real estate, etc.).
- Government documents or benefits – obtained or forged in the victim’s name for driver’s licenses, tax returns, or government benefits.
- Miscellaneous fraud – including employment data, medical treatment or services/drugs, evading legal sanctions, criminal records, tax refunds, Internet accounts, bankruptcy, leases, purchases of securities and investments.
3. Because they (probably) won’t get caught.
Let’s face it: Most identity thieves are never caught. Of the thousands of cases, precious few are ever brought to prosecution. Most financial institutions consider ID theft an unavoidable cost of doing business.
Even the Attorney General of the Commonwealth of Massachusetts, herself a recent identity theft victim, says, “the chances of [identity thieves] ever being prosecuted are ‘slim to none’.”
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AnnualCreditReport.com is the official site to help consumers to obtain their free credit reports. This central site allows you to request a free credit file disclosure, commonly called a credit report, once every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion.
You may request your free credit report online, by phone or through the mail. Free credit reports requested online are viewable immediately upon authentication of your identity. Free credit reports requested by phone or mail will be processed within 15 days of receiving your request.
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Over the last three years, some 49 million Americans were told that their personal information was lost, stolen or improperly disclosed by government agencies, banks or various other companies, according to a recent survey by Harris Interactive.
The solution, say the nation’s three major credit bureaus (among many other independent companies), is credit monitoring. For $60 to $180 a year, Equifax, Experian and TransUnion claim they’ll protect you from identity theft by regularly watching for changes in your credit report. About 24 million customers have signed up, according to Javelin Strategy and Research, a California-based company.
If you’re a confused and frightened customer (like most of us are when it comes to identity theft), you could end up believing one of these “Identity Theft Protection” promises, influenced by the fanfare of the marketing campaign.
But you really shouldn’t. Some of the most effective identity theft protection tools for consumers are... free. Yes, you read that correctly: Free. Or, at the very least, at a nominal fee.
These tools include Fraud Alerts, Credit Locks and Credit Freezes, Pre-screen/Opt-out Lists, the National Do Not Call Registry, and everyone’s favorite, Free Annual Credit Reports.
Any quick Internet search will provide you with a limitless selection of identity theft protection choices – from a variety of companies ready to offer you (and charge you for) tools that revolve around what is essentially free to you already. But instead of offering them to you at no cost, they’ll instead charge you as much as $100 or more per year.
BUNK ALERT: As you might expect, like any burgeoning industry, there’s going to be a lot of opportunists out there alongside the legitimate businesses. The best will offer real services the ordinary customer either doesn’t want to do themselves or would spend a lot of time doing (if they chose the do-it-yourself route). Charging a fee to monitor the Web for you to find out if your personal information is being released without your permission is a helpful tool, but simply offering credit freezes for $100 a year is not.
Still, there’s also the argument that you can wash your clothes by hand instead of using a machine. People are often too busy to worry about checking their credit reports every quarter. So if you’re one of those I-like-the-convenience customers, knock yourself out.
Hence, it almost seems inevitable that consumers will continue to pay as much as $100 or more per year for services that they could essentially have for free, or for a nominal fee, if they were to be properly directed...
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Every day, your personal information is used by someone, somewhere, for something. Most of these uses are perfectly legitimate and legal.
Most companies vow to keep your personal information safe and secure. But what happens when a company you’ve done “business” with, such as a retailer, a grocery store, a magazine publisher, your Internet, phone, or cable service provider, (oops!) loses your personal information?
It happens more than you might think.
OOPS #1: The theft of millions of customers’ credit card information from a major discount retailer continues to wreak havoc on the retailing giant. The retailer reported that in 2007 more than 45 million credit and debit card numbers were stolen from its IT systems over an 18-month period. It’s considered to be the largest customer data breach on record. Read more here
OOPS #2: An "unauthorized individual" infiltrated the computer network of a third-party payment processor and may have stolen up to 40 million credit card numbers. All brands of credit cards were exposed in the attack, including 14 million MasterCard accounts, the firm said. Read more here
OOPS #3: A major discount warehouse club experienced a security breach that exposed credit card data belonging to an unspecified number of customers who purchased gas at the wholesaler’s stations. In a brief statement, the company said it was alerted to the problem by credit card issuers who reported that customers were complaining of fraudulent charges on their statements. Read more here
OOPS #4: A security breach at an East Coast supermarket chain exposed more than 4 million card numbers and led to 1,800 cases of fraud, the chain announced. Credit and debit card numbers were stolen during the card authorization process and about 4.2 million unique card numbers were exposed, placing the case among the largest data breaches ever. Read more here
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