Identity theft is the act of taking someone’s personal information and using it to impersonate a victim, steal from bank accounts, establish phony insurance policies, open unauthorized credit cards, or obtain unauthorized bank loans. In some more elaborate schemes, criminals use the stolen personal information to get a job, rent a home or take out a mortgage in the victim’s name.
Close to half of identity theft cases result from a lost or stolen wallet, checkbook, credit card, or another physical document. But as online shopping becomes increasingly popular, it can also pose an identity risk.
Victims of identity theft are often left with lower credit scores and spend months or even years getting credit records corrected. They frequently have difficulty getting credit, obtaining loans, and even finding employment. Victims of identity theft fraud often travel a long and frustrating road to recovery; depending on the severity of the identity theft
fraud damage, the recovery process can take anywhere from a few weeks to several years.
Most homeowners and renters policies provide coverage for theft of money or credit cards; however, the amount of coverage is limited (usually $200 in cash and $50 on credit cards). Once you have reported your credit card’s loss or theft to the issuing company, you are responsible for only $50 of unauthorized use.
Some companies now include coverage for identity theft as part of their homeowners insurance policy. Check your policy to find out. Others sell it as either a stand-alone policy or an endorsement to a homeowner or renters insurance policy that can run about $25-$50 annually. Identity theft insurance provides reimbursement to crime victims for the cost of restoring their identity and repairing credit reports. It generally covers expenses such as phone bills, lost wages, notary and certified mailing costs, and sometimes attorney fees (with the insurer’s prior consent). Some companies also offer restoration or resolution services that will guide you through the process of recovering your identity.
The use of stolen credit card numbers is among the most common forms of identity theft. Still, some schemes use electronic means, including online scams like ‘phishing,’ in which thieves use email inquiries purporting to be from financial or other online organizations to obtain sensitive account information. Others might use more old-fashioned methods, such as ‘dumpster diving’—rooting around in people’s garbage to collect financial information.
Many credit card companies are now using radio-frequency identification (RFID) chips in their credit cards instead of magnetic stripes. The advantage is quicker, more efficient transactions, especially those carried out at traditional cash-only retail outlets, such as fast-food restaurants or convenience stores. However, radio frequency identification may make it possible, in some cases, for identity thieves to use a simple electronic device to capture the information. The scariest part is that it can happen right in your presence, without you even knowing it.
Tips for Avoiding Identity Theft
- Keep the amount of personal information in your purse or wallet to the bare minimum. Avoid carrying additional credit cards, your social security card, or passport unless necessary.
- Guard your credit card when making purchases. Shield your hand when using ATMs or making long-distance phone calls with phone cards. Don’t fall prey to “shoulder surfers” who may be nearby.
- Always take credit card or ATM receipts. Please don’t throw them into public trash containers; leave them on the counter or put them in your shopping bag where they can easily fall out or get stolen.
- Do not give out personal information. Whether on the phone, through the mail, or over the Internet, don’t give out any personal information unless you have initiated the contact or are sure you know who you are dealing with and that they have a secure line.
- Proceed with caution when shopping online. Use only authenticated websites to conduct business online. Before submitting personal or financial information through a website, check for the locked padlock image on your browser’s status bar or look for “HTTPS://” (rather than HTTP://) in your browser window. If you have any concerns about the authenticity of a Web page, contact the site owner to confirm the URL.
- Be aware of phishing and pharming scams. In these scams, criminals use fake emails and websites to impersonate legitimate organizations. Exercise caution when opening emails and instant messages from unknown sources and never give out personal, financial, or password related information via email.
- Make sure you have a firewall, anti-spyware and anti-virus programs installed on your computer. These programs should always be up to date.
- Monitor your accounts. Don’t rely on your credit card company or bank to alert you of suspicious activity. Carefully monitor your bank and credit card statements to make sure all transactions are accurate. If you suspect a problem, contact your credit card company or bank immediately.
- Order a copy of your credit report from each of the three major credit bureaus. A new law that took effect December 1, 2004, entitles you to one free credit report per year. Your credit report contains information on where you work and live, the credit accounts that have been opened in your name, how you pay your bills and whether you’ve been sued, arrested, or filed for bankruptcy. Make sure it’s accurate and includes only those activities you’ve authorized.
- Place passwords on your credit card, bank, and phone accounts. Avoid using easily available information like your mother’s maiden name, your birth date, any part of your Social Security number or phone number, or any series of consecutive numbers. If you suspect a problem with your credit card, change your password.
- Shred any documents containing personal information such as credit card numbers, bank statements, charge receipts, or credit card applications before disposing of them.
To make it more difficult for identity thieves to open accounts in your name, you can also contact the fraud department of any of the three credit reporting agencies to place a fraud alert on your credit report—by law, the agency you contact is required to contact the other two agencies. The fraud alert tells creditors to contact you before opening any new accounts or making any changes to your existing accounts. The three major credit bureaus are Equifax, TransUnion, and Experian.
If you are the victim of a crime, report it to the credit card company and police immediately. Ask for a copy of the police report. You will need it if you want to file an insurance claim or report the FTC’s crime for their assistance. Victims of identity fraud can contact the FTC online or at 877-IDTHEFT.
The following companies offer identity theft insurance, some as part of a homeowners policy, some as an endorsement, and some as stand-alone coverage.