The Federal Trade Commission (FTC) revealed that there were 1.4 million reports of identity theft in 2020, nearly double the amount recorded in 2019. With identity theft on the rise, vigilance is important. With some proactivity, you can help prevent yourself from becoming a victim of identity theft — or, at the very least, mitigate the damage that an identity thief can cause.
This article covers everything you need to know about ID theft, including what it is and why it can be so bad for your credit report. We also go over how to report identity theft and the steps you can take to protect your credit.
Identity theft occurs when someone steals your personal information and uses it to commit fraud. The type of information that could be stolen includes:
- Social Security number (SSN)
- Credit card numbers
- Bank account information
- Driver’s license information
- Former places of residence
The types of fraud that can be committed with this information include:
- Opening new accounts, such as a credit card or bank account
- Taking out loans
- Receiving medical treatment
- Using existing cards
- Accessing cash in your bank account
- Filing tax returns with the IRS and receiving a refund
All of this is done under your name and with your credit. The identity thief does not intend to repay the debt, which therefore harms your credit file.
Identity theft can have long-lasting implications on your credit. If you catch identity theft quickly enough, you may be able to limit the impact and resolve it within a few days. However, if the theft goes unnoticed, the effects can last for years.
Because the identity thief does not intend to repay funds, your credit score may take a hit. All the work you’ve put in to build credit could evaporate in a matter of weeks or months. If your credit score is low, you will have a hard time securing housing and opening new accounts. You’ll likely also see your premiums increase on your auto and home insurance.
While it’s possible to work with financial institutions to get the fraudulent activity removed from your credit report, this process could take a while. You may have to call and speak with a company’s fraud department multiple times, following up routinely if the information is still displaying on your credit file.
We’ll touch more on how to report identity theft in the section below. In the meantime, be aware that the hours and dollars you spend fighting identity theft are not recoverable. The more proactive you are about noticing and reporting fraud from the get-go, the easier it could be to get it removed from your credit file.
Lastly, identity theft can take a toll on your physical and mental health. The Identity Theft Resource Center found that 41% of victims report sleep disturbances, and 29% of victims report physical symptoms that range from aches and pains to heart palpitations.
Should an identity thief get a hold of your financial information, you’ll want to act quickly to stop the fraudulent activity immediately. Below are some things you can do to report identity theft.
If you believe you are a victim of identity theft, consider reporting it to the FTC. Doing so protects your rights and allows you to have the fraudulent accounts removed from your credit report eventually. You can call the FTC toll-free at 877-438-4338 or visit the website IdentityTheft.gov.
When you report your case to the FTC, you’ll receive a checklist of things you need to do as part of your recovery plan.
After contacting the FTC, you’ll also want to contact one of the three major credit bureaus. Doing so allows you to put a fraud alert on your credit file. If the identity thief attempts to open a credit file in your name again, they’ll face increased scrutiny. The credit bureaus may reach out to you directly to confirm whether you attempted to open a new line of credit.
The good news is that you only need to call one of the bureaus. That bureau will then contact the other two. The phone numbers for the three bureaus are listed below:
Once you declare that you are a victim of identity theft, you’re entitled to a copy of your credit report for free. Normally you receive a free credit report every 12 months via AnnualCreditReport.com.
You should also contact your local law enforcement agency to report the identity theft. The police will likely ask for:
- Your FTC identity theft report
- A photo ID
- Your address
- Proof of the identity theft, including collection notices, credit card statements, IRS notices, and correspondence
- An affidavit
By filing a police report, you’ll clear your name in case the thief used your information to commit a crime. Many lenders also want to see that you’ve filed a police report.
The next phone calls you should make are to the companies involved with any fraudulent transactions or compromised accounts. These companies can quickly close the accounts so that the thief does not continue to use them. Most big companies nowadays have a fraud department that is more than willing to assist.
They may ask for your FTC case number and police report as reference. When you file your FTC report, you’ll also receive a template for a letter that you may be asked to provide as a reference.
If there are fraudulent transactions on your credit card, you should also contact your credit card company to reverse the charges. Your liability for any fraudulent charges on the card tops out at $50. In addition, the company will cancel your current card and send you a new one with a different number.
Remember, if you get a new card as a result of identity theft, you will need to change your card information on any accounts or recurring subscriptions that use autopay. You don’t want to accrue late fees or miss payments on top of dealing with identity theft.
Victims of identity theft could spend hours of valuable time trying to mitigate damage and clear their credit files. Being proactive is key when it comes to identity theft protection. Below are a few things that you can do to help protect your credit file ahead of time.
A credit freeze locks your credit file. If a lender runs a hard inquiry, they will be rejected with a notice that your credit file is frozen. A frozen credit file does not mean that you can’t spend with a credit card. It just means that you can’t open a new account without first unlocking your account.
If an identity thief has already opened fraudulent accounts, placing a freeze on your file will prevent them from opening any more. Even if your information has not yet been stolen, a freeze can give you peace of mind knowing that an identity thief will not be able to open accounts with your credit file.
If you’re attempting to open an account and you forget that the file is frozen, the lender will probably let you know. You can then login and immediately lift the freeze. Any of the three credit bureaus can work with you to freeze your credit file.
An extended fraud alert is available to those who have had their identity stolen to deter additional identity theft. While a standard fraud alert lasts for one year, an extended alert lasts for seven. You can place an extended fraud alert on your credit file by contacting one of the credit bureaus. You’ll need to provide documentation like the FTC identity theft report or a police report.
Placing an extended fraud alert will prevent a thief from opening new accounts in your name. You will also be removed from the credit bureaus’ marketing lists for five years. This will keep you from receiving unsolicited offers for insurance and credit cards in the mail.
The best form of identity theft protection is diligence. Remember to review your credit report frequently for errors. Many credit card companies offer consumer protection as a benefit, providing you with immediate access to your credit file.
You can also sign up to receive notifications any time there is a change to your credit file. If you notice a change, you can log in immediately to review it. If you were not the one to prompt the change, you could act to protect your credit. The sooner you catch identity theft, the easier it is to clean up in the long run.
With data breaches and scams occurring regularly, identity theft is more prevalent than ever — leaving your personal information at risk. It’s important that you remain diligent in preventing identity theft. Regularly monitoring your credit report and accounts could help you detect fraud early.
If you discover that you’re a victim of identity theft, there’s no need to panic. Contact the FTC and other relevant parties to get the fraudulent information removed from your file. Remember to be patient. The process may not be easy, but staying on top of it will help you resolve the issue.
Another good financial habit to practice is to eliminate debt from your credit card. To do so, try using a credit card payoff app like Tally. Tally allows you to get out of credit card debt faster and take control of your finances.