With more and more information stored online, more bad guys are just a password away from our personal data. As hackers have stolen financial information from large corporations like Yahoo to the Internal Revenue Service, identity theft is on the rise.
"Identity theft can trash your credit score because there's the risk that somebody takes your name, your Social Security number, and your solid credit rating, goes out, applies for a bunch of credit, and then doesn't repay any of it." cautions Bankrate.com Chief Financial Analyst Greg McBride. "That can really just destroy what otherwise had been years of hard work on your part to build a solid credit rating."
Instead of worrying, follow these common-sense guidelines to minimize your exposure to identity theft.
- Monitor Accounts Yourself – Check all of your bank account statements and credit and debit card purchases line by line. Most creditors and lenders provide updated online statements, so you can monitor any unusual activity daily. Don't look just for big purchases – ID theft often starts with small innocuous purchases, just to test the card (and your diligence).
- Report/Dispute Incorrect Charges on Credit Cards and Debit Cards – It's important to resolve these quickly, especially with debit cards. Credit card liability for misuse is limited to $50 by Federal law; but debit card misuse must be reported within 60 days from the statement date to avoid liability for the purchases.
- Replace Credit Cards and Debit Cards if Compromised – If you find your cards have been compromised, cancel and replace them immediately.
- Check Existing Fraud Protection Features – Some card issuers offer notification services for unusual purchasing patterns (such as foreign charges) or purchases above a certain limit. Check with your credit card companies about these services. If you are already aware of fraudulent charges to your identity, you could also apply for a full credit freeze. This may become inconvenient for you, because you would have to inform the bureaus before applying for any type of credit, so only take this step if you are trying to limit existing fraud.
- Invest In A Credit Monitoring Service – There are packages available to monitor your credit report on a regular basis. These services offer fraud alerts, which generally require potential creditors to contact you personally before approving any new credit. Signing up for these alerts will make it more difficult for fraudsters to use your information. If you would like to monitor your credit and place fraud alerts to prevent identity theft, check out Credit Manager by MoneyTips.
- Be Aware of Scams – Frauds such as fake correspondence, phone calls, or e-mail phishing scams will come from criminals claiming to be from your card company or a retailer. Twitter, Facebook and other social media are not immune. Legitimate companies will not ask for personal information such as passwords or a Social Security number since they already have the information they need. If a company asks for your Social Security number or password over the phone to verify your identity, only give out this information if you placed the call and are sure you are talking to a company representative.
- Passwords – Use different, difficult passwords and change them often. It's a hassle, but not as big of a hassle as compromised accounts.
- Stick to Trusted Sites – Only make purchases from reputable secure sites. Make sure the URL starts with https://, not http://. Avoid links when possible; they may direct you to a dummy site.
- Shred Documents – Shred any documents containing financial information when you no longer need them.
- Check Medical Statements – Look over all statements you receive from your medical practitioners. The long processing times for medical claims could lead to bills for fraudulent charges under your name reaching collections stage before you even realize they exist. You should also open and check any new Explanations of Benefits (EOBs) you receive, even from organizations you have not dealt with before. These are explanations of the services that you are being billed for, as well as the amounts involved, which are usually sent after a new plan is taken out.
- Computer Precautions – Protect your computer against malware with updated antivirus software (Macs are vulnerable as well as PC's). Low-cost software is also available to automatically scan and encrypt sensitive data on your hard drive, making it far more difficult for hackers to use this information should they gain access to your computer. You should also avoid public computers and minimize your use of wireless connections for financial transactions. Finally, don't let your computer remember your password. It may be convenient for you, but it's even more convenient for thieves.
Don't share personal details, such as passwords and Social Security numbers, in response to emails claiming to be from the Internal Revenue Service, retailers, or your bank. Once your information has been released onto the secondary market, you will be a more frequent target of telephone, mail, and email scams.
If your information was confirmed as stolen, check all accounts immediately; then cancel your cards and replace them. You can request that the credit card company contact you by phone before new accounts are opened in your name. "MoneyTips actually has a credit monitoring service, so that way you can see if someone has opened up a new card under your name very quickly," explains Best-selling Author and Financial Educator Tiffany "The Budgetnista" Aliche. "Because the sooner you could tell your bank, hey, something is not right, the more likely they are to believe you and do something about it."
If your account has already been misused, contact the police along with taking the above steps (canceling cards, etc.) and dispute the charges with your credit card companies. Be sure to get a copy of the police report for reference. Place a fraud alert at one of the three credit bureaus, and get a free copy of your credit report within minutes using Credit Manager by MoneyTips. The Federal Trade Commission offers more information at IdentityTheft.gov and can help you formulate a recovery plan.
Remember, whether you use a credit-monitoring service or not, the ultimate responsibility for protecting your information lies with you. If you would like to prevent identity theft, check out our credit monitoring service.