Identity Fraud:  How It Happens.  How You Can Protect Yourself

You can hardly read a publication or listen to the news these days without hearing something about the rise in identity fraud. A recent study by a prominent research firm recently announced that there were over 15 million American victims of identity fraud in the past year. The average dollar loss per victim doubled over that of the year 2005.

Identity fraud usually occurs in one of two ways:

1.  The victim's existing accounts, usually credit cards, are used to make high dollar purchases

2.  The victim's established credit is used to establish new accounts.

Of the two, the use of existing accounts is usually detected much earlier, often by the credit card company noticing a change in spending habits and contacting the victim, or upon receipt of the first bill with fraudulant charges, and is easier to clear up. Identity fraud used to establish new accounts could take months to surface. Often the first time victims become aware of these new accounts is when they get collection notices, often for thousands upon thousands of dollars.

There are steps you can take to reduce your chances of becoming a victim of the rising tide of identity fraud. One of the most important steps you can take is to guard your Social Security Number, the universal doorway to all of your information. Do not carry your Social Security card in your wallet. Instead, keep it in a safe location at home.  Never give your social security number to anyone unless it is for a transaction at your request and you trust the institution requesting the information.

Buy a shredder at a local office supply company; they are not very expensive.  For any papers that you do not wish to keep in your files, Shred all that contain your credit card account numbers, investment account numbers, bank account numbers, your phone number, your social security number.  Often statements have extra papers that have no meaningful information, or credit card companies send you unsolicted "checks" to charge to your credit card, all with your account number!!  Shred it!!  Needless to say, also shred any expired or cancelled credit cards -- or cut into very small pieces and deposit into multiple little bags with icky garbage before putting into the trash.  Take advantage of the free yearly credit report offered by the big three credit reporting agencies; Experian, Equifax and Trans Union. Report any discrepancies immediately.

Another fast-growing source of identity fraud information is a scam in which the victim receives a letter or "work from home" job offer through the internet, from someone purporting to need someone in your area to help them distribute money on their business transactions.  They ask that you send your bank account information so the money will be deposited directly into your account. You are lured into this scheme by the promise of 10% of the money that you then forward from your account to other accounts.  As hard as it is to believe, thousands of people fall for this every year, only to have their life savings stolen and whisked to an offshore account with no hope of ever recovering it.

Another safeguard is to go paperless. Do your banking online instead of writing checks. Most experts agree that the highest percentage of identity fraud is still a person-to-person theft, such as an unscrupulous store clerk taking account information from a check or a credit card number from a store receipt, rather than from the rising use of the Internet as a means of transacting business.

If you're not home to pick up your mail as soon as it is delivered, considering putting a lock on your mailbox or installing a letter slot. NEVER leave mail for pickup in your mailbox and try to avoid drive by mail boxes.  It's worth a trip to the post office or UPS store to insure that your checks go to the right place and are not intercepted by thieves.  If you receive an e-mail from a company with whom you do business, do not respond using any links embedded in the message. Type the URL in your browser window and log in. Then send the suspected email to the company. Big companies like eBay and Paypal actively pursue these scam artists.

Finally, always make sure you know what your identity theft protection is with your credit card companies and bank.  Most offer free identity theft protection; some charge a small annual fee.  This insures that your liability is minimal if you should become a victim of identity theft. 

By following these simple guidelines and making yourself aware of the many scams being used, you can help keep yourself from becoming one of the growing number of victims of identity fraud.