Identity Theft

Monitoring Your Credit Report to Help Guard Against ID Theft

You probably know something about the problem of identity theft—situations in which a con artist uses someone else's name, Social Security number or other personal details to make purchases, take out loans or commit fraud in the name of an innocent victim. But do you know how you, with the help of credit reports and credit bureaus, can help spot or stop the theft of your identity?

First, here's why you should care about fighting ID theft. It is, by far, the most common fraud complaint that consumers bring to law enforcement authorities and consumer protection groups. According to the latest data compiled by the Federal Trade Commission (FTC), identity theft in 2002 topped the list of consumer fraud complaints for the third year in a row, accounting for 43 percent of the total. And while federal laws and industry practices can limit your liability if you become a victim of identity theft, it can take you a very long time (even years) to repair the damage. That includes notifying creditors and law enforcement that you've been victimized, closing tainted accounts and opening new ones, and correcting your credit report.

You also may be denied loans, jobs, housing, insurance or other opportunities if an ID theft shatters your reputation and credit rating. "A thief can secretly run up thousands of dollars in bills using your name and a different or fictitious address, and you may not be aware of this until you are turned down on an application because the delinquent debt was recorded on your credit report," says Michael L. Jackson, Associate Director of the FDIC's electronic banking branch.

Another good reason to guard against ID theft is that "you protect yourself and other consumers from higher interest rates and fees that lenders charge to recoup losses from fraudulent credit cards and loans," explains Cora Lee Page, a Consumer Affairs Specialist with the FDIC.

So, how can you use credit bureaus and your credit report to protect against identity theft?

Monitor your credit report for warning signs, including loans or leases that have been wrongfully taken out in your name. Also, pay close attention to the "inquiries" section of the report that shows who has requested a copy of your credit history. That's because thieves sometimes impersonate business people with a legitimate right to obtain credit reports. "Once crooks have the information in your credit report, they can either attempt a financial scam in your name or at least determine your vulnerability as a target of identity theft," says Jackson.

Update: New Law to Make It Easier to Obtain and Correct Your Credit Reports

In an important development, Congress in November 2003 passed a new law that can help you ensure the accuracy of your credit information and monitor your credit files for signs you may be a victim of identity theft. The law will enable you to obtain a free copy of your credit report once a year from each of the three major credit bureaus. You’ll have the right to learn your credit scores, which are designed to help predict how likely you are to repay a loan or make payments on time. And merchants must notify you if they plan to report negative information to a credit bureau. The Federal Trade Commission, the Federal Reserve Board and other government agencies (including the FDIC) will issue rules to put the new law into effect.