Last month, Kim was a victim of identity theft. Somebody used her debit card to make a large purchase of cosmetics.
The thief first tried a couple of test transactions for amounts of $0.01 and $0.00. (How is a $0.00 transaction even possible? I have no idea.) When those worked, she went all-in. She charged $555.90 to the account.
Fortunately, Kim has an excellent bank. USAA both phoned and texted to let her know something seemed suspicious. Then, over the next week, they worked with her to keep disruptions as minimal as possible.
In the end, nobody knows exactly what happened. How did the ID thief get Kim's debit card info? How were they able to buy $555.90 in cosmetics? What's to prevent this from happening again? All that's certain is that Kim lost a great deal of time (but no money) handling this hassle.
Credit Where It's Due
Since the incident, I've been coaching Kim on what she can do to protect herself. We're not taking a comprehensive approach (as suggested in this very thorough identity theft resource at the Personal Finance subreddit). I don't feel like this event warrants more than increased vigilance. To that end, we're taking three specific steps.
- First, it's important that she check her transaction history regularly. Money nerds like me do this several times each week. Kim isn't a money nerd. All the same, I think it'd be smart for her to go online and scan her account statements every Saturday morning.
- Second, I showed her how to access her free credit reports from AnnualCreditReport.com. The U.S. government has mandated that consumers be allowed to view their credit reports from each of the three major reporting agencies once every year. If you'd like, you can obtain reports from all three credit reporting agencies at once. Or, you can stagger your requests, possibly requesting one report every four months from a different agency. (Kim's credit report came back clean — nothing unexpected.)
- Finally, I had her sign up for a free account at Credit Sesame. Credit Sesame is one of many online tools to monitor your credit score. (I like that it analyzes which parts of your credit score or strong and which are weak.)
We didn't find any additional problems. The cosmetic purchase appears to have been a one-time thing. (Or maybe the quick action from Kim and USAA managed to prevent additional problems.) We'll keep a close eye on Kim's accounts for the next several months, though. If other problems occur, we'll escalate the protective measures.
On a lark, I checked my own credit score with Credit Sesame. Drat! I came in at 810, fourteen points lower than Kim. As always, I'm penalized because I don't have enough sources of credit. If I could get a mortgage (like I want), my score would be better.
Still, I shouldn't complain. My credit score has increased a few points this year. (My credit score was 804 when I got a new credit card in February.)
Deter, Detect, Defend
If Kim's situation had been more severe, we would have used the U.S. Federal Trade Commission's excellent site devoted to helping people recover from identity theft. The site includes a comprehensive list of steps to take if you believe your ID has been stolen. It will also walk you through the process of creating a personal recovery plan.
The first step is to deter identity thieves by safeguarding your information.
- Shred financial documents and paperwork with personal information before you discard them.
- Protect your Social Security number. Don't carry your Social Security card in your wallet or write your Social Security number on a check. Give it out only if absolutely necessary or ask to use another identifier.
- Don't give out personal information on the phone, through the mail, or over the internet unless you know who you are dealing with.
- Never click on links sent in unsolicited e-mail. Instead, type in a web address you know. Use firewalls, anti-spyware, and anti-virus software to protect your home computer, and keep them up-to-date. OnGuard Online is a government-sponsored site to help you guard against internet fraud.
- Don't use an obvious password like your birth date, your mother's maiden name, or the last four digits of your Social Security number.
- Keep your personal information in a secure place at home, especially if you have roommates, employ outside help, or are having work done in your house.
I bought an inexpensive shredder last fall. I thought it was a dubious expense at first, but lately I've been shredding everything I can. As I move toward a paperless personal finance system, the shredder becomes even more valuable. Also, based on the rash of mail theft in our neighborhood, Kris and I have obtained a post office box. At just $3.50 per month, it's cheap insurance.
Detect suspicious activity by routinely monitoring your financial accounts and billing statements. Be alert to signs that require immediate attention:
- Bills that do not arrive as expected.
- Unexpected credit cards or account statements.
- Denials of credit for no apparent reason.
- Calls or letters about purchases you did not make.
Regularly inspect your credit report. Credit reports contain information about you, including what accounts you have and your bill paying history.
The law requires each of the three major nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to give you a free copy of your credit report every year. But you have to ask for it.
There are three ways to obtain your credit report:
- Order it online at the government-approved AnnualCreditReport.com.
- Call 1-877-322-8228.
- Complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
You will need to provide some basic information, including your Social Security number, and you may need to provide some personal financial information. If you plan to check your report online, be wary of impostor sites. Be absolutely certain that you have reached AnnualCreditReport.com.
Finally, regularly inspect your financial statements. Review accounts and billing statements, looking for charges you did not make. I review my accounts online at least once per week, and generally more often than that.
If you suspect that you may have been (or may become) a victim of identity theft, you can file a “fraud alert” on your credit reports. This alert tells creditors to follow certain procedures before they open new accounts in your name or make changes to your existing accounts. The three nationwide consumer reporting companies have toll-free numbers for placing an initial 90-day fraud alert; a call to one company is supposed to be sufficient:
- Equifax: 1-800-525-6285
- Experian: 1-888-397-3742
- TransUnion: 1-800-680-7289
Placing a fraud alert entitles you to free copies of your credit reports. Look for inquiries from companies you haven't contacted, accounts you didn't open, and debts on your accounts that you can't explain.
(Note: I'm not convinced the fraud alert system works. I filed a fraud alert with Equifax on Sunday morning. It took them more than 24 hours to respond with e-mail confirmation. When I tried to get my free credit report from the link they provided, the system would not process the request. When I tried to get it by phone, they wanted $10 and I could not reach a live operator to help me. The Equifax e-mail promised they'd forward the fraud alert to Experian and TransUnion, but I still haven't heard from either agency. As I say, I'm not convinced this system works. I'm cranky, in fact.)
Close any accounts that have been tampered with or established fraudulently. Call the security and fraud departments of each company where an account was opened or changed without your permission. Follow up in writing, with copies of supporting documents. Use the ID Theft Affidavit [PDF] to support your written statement.
Ask for verification that the disputed account has been closed and the fraudulent debts discharged. Keep copies of documents and records of your conversations about the theft.
File a report with local law enforcement officials to help you with creditors who may want proof of the crime. Also report the theft to the Federal Trade Commission, which will help law enforcement officials across the country in their investigations. You can use any of the following methods:
- Online at ftc.gov/idtheft
- By phone: 1-877-ID-THEFT (438-4338)
- By mail: Identity Theft Clearinghouse, Federal Trade Commission, Washington, DC 20580
Much of the information in this section is taken directly from FTC documents, which are in the Public Domain.
Lastly, the FTC has put together the following ten-minute educational video to provide an overview of identity theft, and to outline steps consumers can take if they suspect they've become a victim. (Video opens in a new window — sorry, that's the only way I can figure out how to link it.)