Identity Theft Protection – What You Don’t Know Can Hurt You

Identity theft in the form of stolen account information is often paid for with the time you spend contacting banks and merchants to cancel fraudulent transactions.  Unfortunately there are higher financial implications for a more sinister type of identity theft that involves not just a few transactions but entire fraudulent accounts opened in your name.

Fraudulent Account Identity Theft
This type of crime can be much more damaging because identity thieves try to use a false address when they setup a fake account.  Of course this means you don’t receive any bills or other correspondence tied to the account even though it’s open in your name.

Identity Theft Costs
What you don’t know can definitely hurt you.  Bills and debt can mount up in the fraudulent account and when collection agencies finally come after their money, the thief at the fake address will be long gone.  The collection agencies will track you down since the account was opened with your personal information and give you the bill.

Ruined Credit
It’s not just the big bill you have to worry about.  The identity thief may severely damage your credit as they run up the bill, never making payments and raising red flags on your credit report.  These credit problems can have far reaching effects on your ability to take out a mortgage, personal loan, or even get auto insurance.

Lost Time
Obviously since you didn’t open the account or spend the money you’ll have to begin the process of clearing your name and handling the debts.  This process is a very time consuming and frustrating job that can take years to clear up in some cases.

Personal Information Sources
The credit card companies take a pretty big hit from identity theft costs so they provide resources to educate consumers on how to avoid it.  A cheat sheet on protecting yourself against identity theft from Visa lists the following ways that criminals get access to the personal information needed to open accounts in your name.

• Stealing unopened mail (pre-approved credit offers, bank statements, tax forms, bills)
• Access to your home (service person or “friend/family”
• Using inside sources (white collar crime)
• Social Engineering
• Lost wallet or purse
• Dumpster diving
• Online data theft

The thieves can use this information to:

• Open new bank accounts, and write bad checks.
• Establish new credit card accounts and not pay the bills.
• Set up cellular phones or utility services and run up bills.
• Obtain personal or car loans.
• Get cash advances.

Preventing Identity Theft
You can avoid some of the ways identity thieves access your information by getting a secure mailbox, shredding your documents, not giving out personal information over the phone, and keeping the minimum amount of personal information possible in your wallet or purse.

Of course you can’t protect yourself against some of sources such as white collar crime and online theft of your information from a third party. Although you can’t prevent those from happening you can make it more difficult to apply for credit with your social security number by putting a fraud alert on your credit report.

I did this after having my credit card account number stolen, anytime you apply for credit with your social security number, the merchant or financial institution is supposed to see the flag and contact you.  The one downside is that you’re unable to receive your free annual credit report online.  Instead you have to mail in a request for your report.

Monitoring your credit report is definitely a step you should take to protect yourself from identity theft.  Keeping an eye on all the lines of credit and accounts in your name can help you from getting a nasty surprise months down the road. 

Next time I’ll take a look at the form of identity theft where a person actually assumes your identity: name, driver’s license, and all. 

Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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