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Credit Fraud and Protection
What is credit fraud?
Credit fraud, also referred to as identity fraud, identity theft, and account takeover fraud, is a rapidly growing type of consumer credit crime. Criminals steal victims' identities in order to take over their credit accounts. This results in losses of up to $3 billion a year. Monitoring your credit file has so far been the most successful response to credit fraud. Criminals employ a variety of ingenious methods--from raiding mailboxes and trash containers to high-tech eavesdropping--to illegally obtain credit information. Then they use it to receive numerous high-limit credit cards in the victim's name. The perpetrators use the credit cards liberally, charging thousands of dollars of merchandise quickly, then abandon the cards. The victim whose credit history was used to obtain the cards is left to clear up the damage to their credit reputation.
Protect your Social Security Number
Do not print your Social Security number on your checks or give it out unless absolutely necessary. Ask creditors and merchants if you can substitute a special password or code to use instead of your Social Security number. Order your Social Security Earnings and Benefits Statement annually to check for fraud by calling (800) 772-1213.
Put a Fraud Alert statement on your credit report
Ask Trans Union and Experian to put a fraud alert statement on your credit files, asking credit grantors not to approve any new accounts without calling you first. This will prevent you from getting instant credit--but it will also prevent thieves from obtaining unauthorized credit in your name. Equifax will not allow consumers to add a statement until they have been victimized. To attach a statement for up to 7 years to your Trans Union or Experian credit report, call each bureau for instructions.
Experian (800) 682-7654
Equifax (800) 422-4878
Trans Union (316) 636-6100
If your purse or wallet is stolen
In the event of theft, you can protect yourself and your accounts against fraud by following these tips:
Report the crime to the police and obtain a copy of the report and the name of the person who took the report. Distribute the report to your bank, credit card company, insurance company, etc.
Contact affected credit grantors when credit cards are stolen. Get new cards and account numbers. Ask that old accounts be closed at "customer's request" rather than being labeled "lost or stolen". Creditors may interpret the label "lost or stolen" as being the consumer's fault.
Contact the three major credit bureaus to report the crime. Their special fraud phone numbers are: Equifax (800) 525-6285 Trans Union (800) 680-7289 Experian (800) 682-7654
Ask the three major credit bureaus to flag your accounts and add a victim's statement to your file. An example of a victim's statement is, "My ID has been used to fraudulently apply for credit. Please contact me at 555-1234 to verify any credit applications.
Once you've cleared up your credit record, check your credit report regularly to make sure no new fraudulent activity has occurred.
How are late charges assessed?
A creditor can charge a late fee if you do not make your payment on time. If you do not include the late fee with the next regular payment, the creditor cannot subtract the late fee from your payment. But if you skip a payment entirely, the creditor can charge late fees on all payments until you bring your account up to date.
Creditors and collection agencies
When you have not paid your bills on time, many creditors will turn your account over to a collection agency. Debt collection procedures begin with written notices reminding you that your payment is overdue, and typically progress to telephone calls. The Fair Debt Collection Practices Act requires that debt collectors treat you fairly and forbids debt collectors from taking actions that are abusive, deceptive, and unfair. Report any problems you have with a debt collector to your state Attorney General's office and the Federal Trade Commission.
Need help managing your credit?
A merged report from all three major credit bureaus is recommended as a starting point if you need help repaying creditors, managing debt, or setting up a personal budget, consider obtaining professional help from a reputable, nonprofit organization such as Consumer Credit Counseling Service. They have offices nationwide. For the office nearest you, call (800) 388-2227.
Combating credit fraud As a consumer you can protect yourself and your credit card accounts against fraud by following these tips:
Safeguard your credit cards and treat them like money
Review your statement carefully to make sure all charges are accurate
Report billing errors and lost or stolen cards to your credit card issuer immediately
Keep your personal information private
Minimize the amount of personal information a thief can steal
Don't carry extra credit cards, a Social Security card, birth certificate, or passport
Sign your new cards as soon as you receive them
Keep a list of all credit cards, account numbers, and expiration dates so you can notify creditors quickly in case of theft or loss
Never give a card number or other information over the phone unless you initiated the call
Shred preapproved credit card offers, credit card receipts, copies of airline tickets, travel itineraries, and anything else that displays your credit card information before putting them in the trash
Check your credit report multiple times a year
Avoid fraudulent mail intercept of credit offers
One way thieves can fraudulently obtain credit in your name is by raiding mailboxes and trash containers for your unopened or discarded credit offers. To avoid fraudulent mail intercept by reducing the amount of national advertising mail you receive at home, write to the Direct Marketing Association Mail Preference Service. Once your name has been put onto the service, you will see within 90 days a reduction in the amount of mail you receive. To register for this free service, send your name and address to:
Direct Marketing Association
Mail Preference Service
P.O. Box 9008
Farmingdale, NY 11735-9008
Be careful of debit cards
If someone abuses your debit cards, your bank accounts could be cleaned out before you notice the card is missing. If you wait too long to notify the bank, you may not get your money back. A number of banks are now mailing all of their customers new ATM cards that are also debit cards. These new ATM cards can be used instead of checks to purchase merchandise, and stores do not require the use of PIN numbers. If you receive one of these cards, your best bet may be to destroy it.
Use fewer credit cards
Reduce the number of credit cards you use, and don't carry all of them with you. If a credit card bill is late, call the customer service number immediately. Make sure that your mail hasn't been diverted to a new address.
Improve a bad credit report
When negative credit information (such as late payments, charged off accounts, tax liens, or judgments) appears on your credit report and is accurate, only time can assure its removal. There is nothing you (or anyone else) can do to remove accurate information from your credit report until the reporting period has expired. Credit bureaus report negative information for seven years and some bankruptcies for 10 years.
Filing for Bankruptcy
Bankruptcy is a legal procedure that provides debt relief to consumers who cannot pay their bills. The decision to file for bankruptcy is a serious step, and is usually taken when other efforts to correct financial difficulties have failed. A bankruptcy is very detrimental to your credit history and remains on file for up to 10 years. Most banks will not lend or extend credit to previously bankrupt individuals. Most consumers who declare bankruptcy do so under Chapter 13 or Chapter 7 of the Bankruptcy Code.
Chapter 13 or "reorganization" allows debtors with a steady income to pay off all or part of their debts over a 3 to 5 year period instead of surrendering property.
Chapter 7 or "straight bankruptcy" is the most drastic type of bankruptcy. Debtors turn over to a court representative all of their assets for distribution to creditors. Unlike Chapter 13, there is no repayment plan, and the court will then declare that legally the debtors are no longer in debt.