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Monitoring Your Credit Report
Help Guard Against ID Theft

You probably know something about the problem of identity theft—situations in which a con artist uses someone else's name, Social Security number or other personal details to make purchases, take out loans or commit fraud in the name of an innocent victim. But do you know how you, with the help of credit reports and credit bureaus, can help spot or stop the theft of your identity?

First, here's why you should care about fighting ID theft. It is, by far, the most common fraud complaint that consumers bring to law enforcement authorities and consumer protection groups. According to the latest data compiled by the Federal Trade Commission (FTC), identity theft in 2002 topped the list of consumer fraud complaints for the third year in a row, accounting for 43 percent of the total. And while federal laws and industry practices can limit your liability if you become a victim of identity theft, it can take you a very long time (even years) to repair the damage. That includes notifying creditors and law enforcement that you've been victimized, closing tainted accounts and opening new ones, and correcting your credit report.

You also may be denied loans, jobs, housing, insurance or other opportunities if an ID theft shatters your reputation and credit rating. "A thief can secretly run up thousands of dollars in bills using your name and a different or fictitious address, and you may not be aware of this until you are turned down on an application because the delinquent debt was recorded on your credit report," says Michael L. Jackson, Associate Director of the FDIC's electronic banking branch.

Another good reason to guard against ID theft is that "you protect yourself and other consumers from higher interest rates and fees that lenders charge to recoup losses from fraudulent credit cards and loans," explains Cora Lee Page, a Consumer Affairs Specialist with the FDIC.

So, how can you use credit bureaus and your credit report to protect against identity theft?

Monitor your credit report for warning signs, including loans or leases that have been wrongfully taken out in your name. Also, pay close attention to the "inquiries" section of the report that shows who has requested a copy of your credit history. That's because thieves sometimes impersonate business people with a legitimate right to obtain credit reports. "Once crooks have the information in your credit report, they can either attempt a financial scam in your name or at least determine your vulnerability as a target of identity theft," says Jackson.

In general, you should consider obtaining copies of your credit report from the three major credit bureaus about once a year to verify that the information is correct. But be aware that there are services that will frequently (even daily) monitor your credit report for possible signs of fraud or theft. "These services don't necessarily prevent identity theft from happening, but they can alert you to changes in your credit file that may indicate identity theft," says Jackson. He adds that the fees for these services (often $70 or $80 for a yearly subscription) can be more costly than obtaining periodic credit reports on your own, but the added level of convenience may be worth the cost.

If you find suspicious transactions on your credit report, take the following steps:

  • Contact creditors to discuss questionable items and close accounts that you believe are fraudulent or have unauthorized transactions. Call the fraud department at each of the major credit bureaus to ask that a "fraud alert" be placed in your file, so that lenders will be alerted to the fact that you may be a fraud victim. Ask that the fraud alert state that you do not want new credit extended without contacting you first. Contact the local police to file a report. Keep a copy in case you need it later as proof of the crime.

  • Consider filing a complaint with the FTC, which will store the information in its database so that it can be accessed by law enforcement agencies worldwide. The FTC also can provide information on what steps victims should take and sometimes will refer cases to other government agencies or private organizations for further action.

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