Identity Theft: How to Prevent It & How to Repair the Damage

Thanks to a new law, the fight against identity theft is less costly for Americans.

Starting September 21, 2018, the day the new federal law was passed, Americans can now initiate a credit freeze at each credit bureau, free of cost. (Previously, credit freezes cost up to $10, with an additional fee for each time the credit freeze was lifted.)

By initiating a credit freeze, consumers restrict access to their credit information, preventing unauthorized users from opening fraudulent accounts.

The new law passed one year after the infamous Equifax data breach, where 146 million American consumers had their social security numbers compromised, relentlessly exposing them to identity theft.

But, what is identity theft, and what can the average consumer do to protect themselves?

Identity Theft: A Definition

Identity theft occurs when a person gains unauthorized access to a consumer’s private information and uses it for illegal purposes.

Examples include:

• Accessing another person’s bank accounts to withdraw money or open additional accounts

• Using someone else’s social security number to falsify documents

• Skimming ATM and credit cards to make fraudulent purchases

According to Javelin Strategy & Research, identity fraud victims increased by 8% in 2017, reaching 16.7 million victims in one year alone.

While the numbers are staggering, there are steps you can take to help prevent identity theft from happening to you.

How to Prevent Identity Theft

1. Freeze your credit. Credit freezes restrict access to your credit information, which makes it harder for identity thieves to open new accounts. When a credit freeze is put into place, the credit bureau sends a unique, confidential PIN to the account owner. Without the PIN, the freeze cannot be lifted.

Visit Equifax, Experian, and TransUnion to place a free credit freeze at each credit bureau. Be sure to keep your PIN in a secure location and do not share it with anyone.

If you are opening a new financial account or planning a major purchase that requires a credit check – such as a mortgage or new vehicle – be sure to lift the freeze so you the company can review your credit history.

2. Monitor your financial information. Unfortunately, credit freezes do not prevent thieves from wreaking havoc on existing accounts. You will still need to monitor your credit reports and financial statements to ensure there isn’t fraudulent activity on your accounts.

There are many services, both free (such as Credit Karma) and paid (such as Privacy Guard) that can help you do this.

3. Create strong passwords. In 2017, account takeovers cost Americans $5.1 billion in losses. This type of fraud, where hackers steal account credentials to extract funds, can be easily prevented by creating strong passwords (meaning, 12+ characters with a combination of letters and numbers) for each account.

Instead of trying to remember each password, use a password manager to help you store and generate the information. Add an extra layer of security by adding 2-step authentication wherever possible.

4. Be careful in public. Never use public Wi-Fi to access your bank account or similar accounts with sensitive information. Public Wi-Fi networks are notoriously unprotected – by using these networks, you expose yourself to hackers who can monitor your activity and steal your information.

If you must use public Wi-Fi, be sure to use a virtual private network (VPN). VPNs allow you to connect to another network securely and shield your browsing activity.

5. Install anti-virus, anti-malware software. This should be a no-brainer. Unfortunately, Microsoft’s Security Intelligence Report found that over half of PC owners have not installed any anti-virus/anti-malware software.

6. Limit how much information you share. While it may seem harmless to share your birthdate on social media, this is an example of personal identifying information, which can be used to access additional sensitive information. Similarly, you should always be cautious before sharing your social security number (for example - does your dentist really need your SSN?).

7. Shred papers before throwing them away. Unfortunately, privacy laws do not extend to your trash bins. This means that anyone can legally dig through your recycling bins and take any sensitive data. With this in mind, be sure to shred all paperwork that contains personal identifying information – especially bank and credit card statements, legal documents, and tax information.

What to Do If Your Identity Is Stolen

If your identity has been stolen, don’t panic. Repairing the damage will be challenging, but there are many resources available to help you recover. The quicker you act, the easier the damage control will be.

Below, we’ve identified the essential actions you must take in order to repair your credit:

1. Change all of your passwords immediately. If your identity has been stolen, it is likely that your digital accounts may have been compromised. Take a moment to change all of your passwords to prevent ongoing access. Instead of trying to create or memorize new passwords, use a password manager, such as LastPass.

2. Identify the problem accounts and contact the appropriate companies. After you change your passwords, your next step is to contact the affected companies. An early warning sign for fraudulent activity is unauthorized transactions. Double-check that you remember each transaction on your account. If not, contact the company to lock the account, dispute the charges, and – if necessary – close the account.

Act quickly – the quicker you act, the more likely the fraudulent charges will be dropped. You don’t want to be stuck paying for someone else’s bill. Once the fraudulent charges are removed, confirm with each company that the correct financial information will be reported to each credit bureau (without the fraudulent charges).

3. Review your credit report for suspicious accounts. Next, you will want to ensure that the identity thieves did not open any new accounts in your name. You are entitled to one free credit report per year. Get an official copy of your credit report from one of the credit reporting agencies (TransUnion, Equifax, or Experian) and review each account for legitimacy. If you find a fraudulent account, contact each credit bureau immediately to place a fraud alert.

4. Report the identity theft to the FTC. The Federal Trade Commission (FTC) built a one-stop website, identitytheft.gov, to help identity theft victims recover. Here, you can file an identity theft report directly with the agency and build a recovery plan. Without the report, it will be near impossible to prove to businesses that someone has stolen your identity. Be sure to file the report immediately and use it to dispute fraudulent charges and accounts.

5. File a police report with local law enforcement. A police report will help you prove to businesses, creditors, and collection agencies that someone has stolen your identity. Some businesses will even refuse to dispute fraudulent charges without proof of a police report.

Visit your local law enforcement agency and ask them to file a police report for identity theft. In case the officers are unsure of what to do in the event of identity theft, be sure to print and present this memo from the FTC, as well as a physical copy of your identity theft report.

Confirm that the police report contains details about the affected accounts and the fraudulent activity. Be sure to get a copy of the policy report for your files.

6. Follow up with the appropriate businesses and credit reporting agencies. After you file an identity theft and police report, it is your duty to check-in with the appropriate companies and credit agencies to confirm that the fraudulent activity has been removed from your credit report. If not, contact the appropriate party via phone and email (for documentation) every 30 days until the matter has been resolved.

Create a folder and collect records of all communications. Take detailed notes of each phone call and collect the contact information of each representative you speak with.

If the company has not removed your information in a timely manner, submit a complaint with the Consumer Financial Protection Bureau (CFPB). Once the complaint is received, they will open an investigation.

Stay Vigilant

Dealing with identity theft is challenging, but recovery is possible. When cleaning up the damage, it is important to act quickly, document everything, and stay vigilant. Don’t let the arduous process deter you from staying on task. Once your identity and credit have recovered, you will be glad that you put in the work to repair the damage.

Of course, the best course of action is to prevent identity theft from happening. Stay vigilant in protecting your accounts, and do whatever you can to protect your personal identifying information.

Security in obscurity does not exist – identity theft can and will happen to you if you do not keep your guard up.