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Only You Can Protect Your Credit

Identity theft is the latest greatest "new" crime that's costing people both time and money. From what we're all read in the press it's out of control, usually an unsolvable crime (unfortunately, crime sometimes does pay), and costly to the victims. It's a problem without a silver bullet fix and is not easy to prevent. (It's like car theft. If they want your car, they're going to get it no matter how fancy the alarm.) Still there are things you can do and it starts with checking your credit reports.

In the old days-and by old I mean about five years ago-you could protect your credit by occasionally monitoring your credit card statements and requesting the occasional credit report. The occasional instances of fraud stood out, and you could work with your creditors in fixing things rather quickly and painlessly.

However, it's not that simple anymore. With the increase in the reports of identity theft, you need to take a more proactive role to protect your credit. The old adage applies-the best defense is a good offense.

We are getting overwhelmed with almost daily news stories about lost and stolen personal data. Some cases are due to simple human error like lost laptop computers, misplaced computer disks, and backup tapes that grew legs creating opportunities for bad people to do bad things.

Other cases are about criminals plotting the theft of the information they need to become identity thieves. Once they have your personal information, they can steal your identity. The practical impact could be that they do lots of things in your name like open a bank accounts, borrow money, sell your real estate, obtain a passport and even get arrested using your name.

Identity theft, a crime almost unheard of five years ago, has exploded.

To fight this threat to your credit and good name, I strongly urge you to take an active role in protecting your credit. You should already be reviewing your credit card statements for unfamiliar or suspicious charges. If you find something on your statement, take the time to check it out.

As a first step, search your memory and your records to see if you did actually make that charge. If not, move on to asking your immediate family. Now I'm not suggesting you give your spouse and kids the third degree, or interrogate them in a small room under a lone hanging light bulb, but do ask your family members about any suspicious charge. If they are not responsible, call the credit card company.

Invariably, your credit card company will cancel your card and issue you a new card with a new credit card number, while at the same time investigating your claim. For the most part, if it's just a single fraudulent charge, your work is done.

However, you should be taking a more active role in managing your credit report. You should get copies of your credit report regularly. Once a year is the minimum and once every six months is better.

I suggest yearly as the baseline because the Fair Credit Reporting Act allows you to request a free copy of your credit report from the three major credit reporting agencies (Equifax, Experian, and TransUnion). And free is good! These agencies have even set up a website to process such requests:www.annualcreditreport.com.

Another option is to request a "free" credit report through one of the many online companies that offer this service. Be careful here as many of these "free" credit reports come with strings attached. Usually, when you read the fine print, you find that you are signing up for some time of credit monitoring or credit card protection service. If you are interested in this type of service, and they can be worthwhile, that's fine. Otherwise, please keep in mind that your "free" credit report may come with significant costs.

The most costly choice, but in many ways the best choice, is to use the services of websites likewww.myfico.com where you get enhanced credit report for a fee. For less than $50, they will provide your credit report from all three credit reporting agencies along with your FICO scores. Your FICO score is the credit agencies assessment of how you pay your bills. It's a vital number when you do things like lease a car or mortgage your house. Lenders tend to rely heavily on your FICO in making lending decisions.

Bear in mind that an identity thief can get your FICO so low that not even your mother will lend you money.

Once you receive your credit report, review your credit history closely. If you've never looked at yours, the sheer volume of data in your credit report may overwhelm you. A credit report contains information about your credit history, a list of your past residences, and other related information. Seeing a portion of your life laid out in plain text can be a little unnerving. (In case you were wondering who your mortgage lender was 10 years ago, your credit report may just tell you.)

Take your time with your review. This is not a 15 minute task. You'll notice that the report contains records of your credit history, possibly starting with your first car or credit card.

You should be reviewing your report looking for errors and incomplete information. Did you pay off that credit card last year? Make sure your credit report reflects that. However, if you paid it off last month, bear in mind that there may be some lag time before that payment shows up on your credit report.

Make sure every account listed is an account you opened. Be sure the balances shown for each account match your records, and that your report accurately reflects your payment histories with each creditor.

Don't freak out if you do find a problem. Odds are you are going to find at least one error in your credit report-most reports have at least one. If you find an error, you can report it to the credit agency in writing. They will open an investigation and work with you on resolving the mistake.

There is going to be an "Inquiries" section towards the end that reflects inquiries about your credit. Pay particular attention to this section. Review it for suspicious activity like inquiries from companies you didn't contact and accounts you didn't open.

Don't panic if you see inquiries you don't recall. In certain circumstances, creditors, credit card insurers, employers, and other businesses can request your report. They use it to evaluate your applications for credit, insurance, employment, or even renting a home.

Even if your credit report is clean today, you shouldn't stop your defense there. Consider putting a fraud alert on your credit file especially if you have had problems.

A fraud alert will tell every potential creditor that the creditor should take special precautions in verifying your identity-or someone else's applying for credit in your name.

There are two types of fraud alerts you can place on your credit file. You can place a 90 day "initial fraud alert" on your file while you investigate a suspected case of identity theft or case of fraud. If you turn out to be an identity theft victim, you can submit a copy of your identity theft police report and request an extended seven year fraud alert on your credit file.

Unfortunately, fraud alerts will necessitate delays in your getting new credit while a company verifies your identity. How much of a delay varies from creditor to creditor, and the policies each creditor has in place to verify your identity. Your days of on the spot credit approval may be over.

Another step you can take in some states is to put a "credit freeze" on your credit report. A credit freeze bars issuers of credit and other parties from looking at your credit report, but won't stop someone from using a stolen credit card. Since lenders almost invariably want to look at your credit history before issuing credit, a credit freeze will stop the ability of an identity thief from opening fraudulent accounts in your name. You can then have the credit freeze lifted as needed, such as when you need a new car loan or get a mortgage.

Unfortunately, this option is only available in a few states, so check on the law in your state. I'll cover credit freezes in more detail in a later article.

Taking action to protect your credit is going to require some work on your part, but nothing that's unmanageable. Once you have the identity theft problem, that's when you may find that the time required to handle the problem is beyond what you can do. Take the time to protect yourself. The bad guys are out there and they're getting more aggressive each day.

If you are victimized by identity theft, we have the expertise to assist. While you don't need legal assistance for a stolen credit card, you may find that you need help if you really have had your identity stolen. Once you see a pattern of problems related to your identity, you can probably safely conclude that you have an identity theft nightmare cooking. If that is the case, act quickly. The problem tends to mushroom.

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