The Growing Risk of Credit Fraud and What You Can Do To Protect Yourself

Recently, I received a letter in the mail from a bank notifying me that I was being denied for a credit card. The thing is, I hadn’t applied for a credit card. A couple weeks earlier I received an alert from Mint that there was a new inquiry from this bank on my credit report . I thought nothing about the email because there are always random soft inquiries on credit reports from existing creditors updating their records, and it was from a bank I was currently doing business with. But now I knew something was seriously wrong. By the time I opened this letter it was too late in the day to call the bank. By the time I had a chance to call the bank the next day I got another letter in the mail, from a different bank, that I hadn’t done business with for at least 10 years, denying me for another credit card that I had never actually applied for. “Oh no” was my first thought.

Now, I was worried, but actually not that worried. Because of my previous career in the entertainment industry, I have always kept a fraud alert active with the credit reporting agencies. I worked on 20 or more productions per year, and each production is basically a new job that you’re filling out new-hire paperwork for. This means your social security number and other information ends up on numerous documents and in numerous hands. I was always concerned my social security number would get taken and used by someone trying to use my credit to benefit themselves. But in the 15 or so years that I’ve been keeping an active fraud alert on my credit I had never had someone else actually trying to use my credit… until now.

First I called Bank #1, the bank from which I received the first letter. After getting transferred a few times I finally got to talk to someone in the credit decision and fraud department. They spent some time to verify my identity, and even called me back at the phone number listed on the fraud alert on my credit report. That allowed them to give me some additional information. The person who applied for the credit card used my name, address, social security number, and drivers license number. They did try to give an alternate mailing address to receive the credit card at. They also applied for another credit card from a different division of the same bank, for which they were also denied, and the denial letter was in the mail (I received it the next day). The applications were denied because the person was unable to answer certain questions to the satisfaction of the credit underwriter.

This is the whole point of the fraud alert. It requires the creditor to access a system through the credit reporting agency they are using and provide answers to specific questions. These questions can include information about where you’ve lived, loans you’ve had in the past, people you know, places you’ve been to, jobs you’ve had, and any multitudes of financial and personal information that may have been captured about you over the years. Sometimes the information they have is scary, making you really wonder, “How do they know that?” When you set up the fraud alert you also provide them with a phone number you want to be reached at when applying for credit. In my experience, the creditor will call that phone number as a final step of the verification process.

Because the person wasn’t able to answer the questions correctly, they were denied. Not taking no for an answer the first time, they tried again, but were denied a second time. The person I spoke to said the fraud alert is what saved me. Had that not been active, they probably would have been approved because the other information is correct and my credit score is high. He recommended checking with the post office for recent mail forwarding requests. Apparently a tactic sometimes used in identity theft is they request an address change or mail forward through the post office. This would make an approved credit card get mailed to them instead of to you. So if you ever notice a significant decrease in mail to a particular person in your household, check if someone submitted an address change or mail forward request with your local post office. It’s very easy and inexpensive, and no proof of identity is required to request one at a post office. In recent years they have made it a little more difficult, but it’s still too easy.

After talking to Bank #1, I called Bank #2. I went through a similar process of verifying who I was. They basically gave me the same information. The person had used my information to apply for a credit card and was denied because it was suspicious, and their identity could not be verified.

The fraud alerts through the credit reporting agencies really do work. They saved my credit, potentially saved me financially, and certainly saved me from some major headaches. So you may be wondering, what exactly is a fraud alert and how to you set one up?

HOW TO SET UP FRAUD ALERT

A fraud alert is like a flag that’s put on your credit report. It notifies any credit card company or creditor that may issue you credit in some way (including loans) that you have been a victim of fraud or identity theft in the past. It tells them to take extra steps to verify the identity of the person applying for credit and to confirm they are in fact applying for and requesting credit.

Equifax has a pretty good explanation and additional information on their website: 7 Things to Know About Fraud Alerts.

There are basically two ways to set up of a fraud alert. One is really easy to set up and lasts for one year. The other is an extended fraud alert that lasts for seven years and requires more work to set up because it’s intended for those who are actual victims of fraud and identity theft. I personally have always done the more simple fraud alert. In the past it would last for 90 days, requiring me to renew it every 3 months. Since the Equifax data breach in 2017 the fraud alerts now last for a year. I simply put it on my calendar as an annual event and get reminded once a year to renew.

To actually set up the fraud alert you only need to notify one of the credit reporting agencies: Equifax, Experian, or TransUnion. When you set up the fraud alert with one credit reporting agency they automatically notify the others, so the fraud alert appears on all three. Remember that a creditor may use any of the three credit reporting agencies and don’t need to use all three. In my case, the fraud alert was set up through Equifax, but the credit agencies for both banks was TransUnion, and the fraud alert still worked.

To set up a temporary 1-year fraud alert with Equifax the easiest way is to create a myEquifax account and set up a fraud alert online or call (800) 525-6285. Equifax has really been pushing for setting up fraud alerts online, making it more and more difficult to navigate the phone system and set up over the phone.

To set up a temporary 1-year fraud alert with Experian fill out this online form.

To set up a temporary 1-year fraud alert with TransUnion you can create an account and set up your fraud alert online. You can also call (800) 680-7289 and set one up over the phone.

Remember, the temporary fraud alert is good for one year. Best practice would be to put it in your calendar to remind you to do it in a year.

CHECK YOUR CREDIT REPORT REGULARLY

Note that setting up a fraud alert is not a guarantee against credit fraud or identity theft. It requires the person making the credit decision to do their due diligence in verifying the identity of the person applying for credit and confirm it’s a valid request. Things like social engineering (a hacking tactic) could make it possible for someone to still get approved for credit using your information. That’s why it’s a good idea to check your credit report regularly. When you set up a fraud alert you are entitled to a free annual credit report. Take advantage of that and request your credit report from each credit reporting agency every year.

There are also services that the credit reporting agencies offer that notify you of any activity with your credit history. Equifax offered this as a temporary free service to those who were victims of the 2017 data breach. Another solution is to use Mint. Mint did well in notifying me first that there had been an inquiry on my credit report. Some employers offer a credit monitoring service as an employee benefit as well.

Credit theft and identity theft are very real. A few years ago I even received a notice from the IRS that someone had tried submitting a fraudulent tax return with my information in an attempt to get a tax refund. Fortunately the IRS caught on to it and told me I didn’t have do anything about it. Make sure your doing what you can to protect your credit and your identity. You can use the accompanying checklist to guide you in seeing where some of your risks are and what you can do to address them. It’s a free immediate download once your fill out and submit the form below.

As always, if you need financial advice and planning regarding credit and debt management feel free to...