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Identity Theft or Identity Fraud?

February 4, 2008

The term ‘identity theft’ is thrown around a lot nowadays. It’s pretty much turned into a blanket definition for any type of electronic thievery or impersonation.

So what’s the difference between identity theft and identity fraud?

Identity fraud is usually easy to fix. That’s the good news. The bad news is that it’s very, very common. It happens when someone steals your credit or debit card and uses it to buy themselves all kinds of goodies on your tab.

How would someone get your credit card number?

Here’s a few ways:

  • Lose your credit card
  • Stolen wallet
  • Clerk has a skimmer to steal your number when you pay for something
  • Unsecure website where you purchased something online
  • Phishing email or phone call

To guard against credit card fraud, carefully check your monthly statements – every month. Even better, look at them online once a week. Any charges that you didn’t make indicate someone is using your card. Some thieves will just make small purchases to be sure your numbers work. Then they get serious and start buying big ticket items – lots of them. Most thieves will begin to buy things immediately – like within hours you could have an additional 15K charged on your card.

Many banks will call their card customers if suddenly a lot of unusual charges start coming in. They track your regular spending and flag something that looks unusual. This protects you AND the bank.

You’ll generally only be liable for the first $50 of fraudulent charges. Many banks now waive any liability so it doesn’t cost you anything – except time. Fixing it is no fun. Plus, you lose your nice secure feeling.

How is Identity Theft is different from Identity Fraud?

Identity theft is when a thief uses your personal information to open new lines of credit. Or even to get a job. They can also pretend to be you for medical identity theft. They get treatment and leave you responsible for paying. Ouch – that’s gonna take more than a band-aide to fix. You could even be pronounced dead but still be liable for the charges since you’re really alive.

You may not find out about identity theft for years if you don’t check your credit report regularly. Someone has given your name, social security number, date of birth and driver’s license number and used it to get phone service, loans, boats, cars, jobs – well, the list goes on and on. Illegal immigrants use stolen identities to start a life here and off they go pretending to be you.

Your identity can be sold many times over. Even if you clear it up once, it can happen again.

Actual identity theft is much harder to fix than identity fraud. You’ll be presumued guilty until you prove it wasn’t you who opened the new lines of credit. No matter how much proof you give, some creditors will continue to dog you – they just want to be paid and they don’t care if you’re innocent.

In the meantime, your credit is shot. If you were in the market for a house or new car, it will be impossible to get a good rate because your score has taken a dive. You look like a deadbeat.

But the good news is….

Lawmakers have passed legislation in the last few years to help you protect yourself. You can now get a truly free credit report each year from http://annualcreditreport.com. You can also put a fraud alert on your credit files that requests any new lines of credit be approved by you personally before being opened.

Since November 2007, you can put a freeze on your credit. This used to be available only to identity theft victims in many states. Not even you can open an account if your credit has been frozen.  This makes it the most secure way to protect yourself but it’s not free to freeze/thaw. It’s about $10 at each of the three credit bureaus each time you need to change it. Plus, it will take a week or two to complete.

Protect yourself from identity theft. It’s so much easier than fixing it afterwards. You can do your own identity theft protection or enroll with a company specializing in it. Compare identity theft protection plans.

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