Credit Fraud Prevention

Credit fraud is rampant, with the Javelin Strategy & Research company's "Identity Fraud Survey Report" finding that there were 11.1 million victims in the United States during 2009. Victims have ways to control and repair the damage caused by identity thieves and other criminals, but prevention is the most efficient strategy.

Definition

Credit fraud involves financial damage from unauthorized use of a person's existing credit cards or a thief who opens and uses new accounts under another person's identity, the Federal Trade Commission (FTC) warns. The key to fraud is credit use without knowledge or permission.

Methods

Criminals get enough information to do credit fraud in various ways. Some observe credit card use directly or with hidden cameras to get the credit card number, which is used for online purchases. Some use skimmers, which are devices that steal information from the magnetic strips on card backs. They can be hand held and used by clerks or mounted on automatic teller machines, gas station pumps and other point-of-sale purchase locations, "Consumer Reports" warns. Phishers use emails and phone calls to impersonate banks or legitimate businesses and trick people into giving personal information. Email attachments and malicious websites download software that steals credit card numbers and other information and transmits it to identity thieves.

Solution

Credit fraud effects are often long-lasting because a criminal may keep trying to open new accounts in a victim's name. The FTC recommends adding a fraud alert to Equifax, Experian and TransUnion credit reports and filing a police report. The credit bureaus will extend the alert to seven years if given a report copy. The FTC also advises requesting free credit reports yearly from annualcreditreport.com and examining them for fraud tip-offs like unknown addresses and accounts.

Prevention

Credit fraud is preventable by closely guarding credit card numbers and personal information and using reliable anti-virus and anti-malware software. Smart consumers ignore telephone and email requests for information and avoid doing business with any websites other than those run by well-known retailers. Consumer advocate Clark Howard recommends credit freezes, which totally prevent credit report access and new account openings without a password or pin number. Freezes must be done individually with each credit bureau, and there is a charge of about $10 in most states.

Warning

Some criminals use the fear of fraud to trick people into giving up their credit card numbers. They call or send emails claiming that a person's account is frozen because of suspicious transactions and ask for the number, security code and expiration date to confirm and reactivate the account, Midland Credit Union warns. Never give personal or financial information to a caller, even if a bank name shows up on the caller ID, because it can be spoofed. Emails use logos and real links to appear legitimate, but do not answer them or click anything because there will be a malicious link or attachment. Get the bank telephone number from the credit card back or a statement and ask if there is a problem.