Don't let a gunless robbery turn your credit rating into a nightmare

JOHN F. WASIK

I was the victim of a form of identity theft - twice.

I'm not particularly proud of this fact. On both occasions, my credit card numbers were stolen. The first time, someone pilfered my account to ring up betting charges in Europe. The second time, the villain went on a shopping spree at an office-supply store.

Although I didn't have to pay for any of the fraudulent charges, I discovered there's a lot I could have done to prevent this from happening and avoid potential damage to my credit rating.

Due to the increased use of online shopping, tougher credit standards, and the relative ease of this felony - known as the "gunless robbery" - identity theft will get worse. Some 10 million people a year are victims, according to the Federal Trade Commission, resulting in $50 billion of lost business.

Todd Davis, chief executive of LifeLock
Inc., an identity-theft protection company in Tempe, Ariz., estimates that half of all such robberies are committed by organized crime. The other half are through "social engineering, that is, people like waiters and waitresses, dumpster divers going through trash, your friends and family."

What's vexing to consumers is the time lost in trying to repair their standing with credit agencies and fixing collateral damage.

The first time I was ripped off, my phone company mistakenly shut off my Internet and landlines because I was being billed to a credit card account that had to be closed.

The best way to prevent identity theft is to monitor your credit carefully:

Look at your credit report at least twice a year and well in advance of a major installment loan or mortgage application. You can do a cursory check of all three agencies at annualcreditreport.com.

Immediately report any errors and keep a close eye on whether any unauthorized applications for credit were opened recently. That's a red flag that someone may have stolen your data.

Don't offer your credit card or driver's license numbers to an organization you don't know and never provide your Social Security details unless it's absolutely required by a trusted firm.

If you want to get an extra layer of protection, enroll in extended fraud protection programs. They will scan your accounts and credit files constantly for unusual billing.

Want to take it a step further? Shred any documents or mail that may have account or personal information on it. Use "virtual" credit card numbers provided by your bank for online purchases, if available.

Should you discover that you have been victimized, notify your credit card company immediately and close your account. Also file a report with your local police department.

The bank will send you an affidavit to notarize for any charges you haven't incurred. Document the fraudulent ones and send it back immediately.

While filing an affidavit to note scam charges is part of the process, you need to follow up with credit bureaus to ensure these billings are taken out of their scorings. In other words, you need to see that they "rescore" once you have cleared up your accounts.

The larger problem with identity theft is that it may sabotage your credit standing. Say a thief uses your card number and charges more than your credit limit. That lowers your rating and may make you ineligible for loans.

Need credit immediately after fixing your record? Ask the credit bureaus to do "rapid" rescoring.

To lock down your credit information, you can request that a "freeze" be put on your file through the three major bureaus, Equifax, Experian, and TransUnion. This will prevent anyone from accessing your information.

Keep in mind that if you request a freeze, you will need to unfreeze before you apply for more credit.

"I wouldn't recommend a freeze unless you have a need for it," says Gerri Detweiler, a credit adviser with credit.com, a consumer website. "That would include going through a nasty divorce or dealing with a lost or stolen wallet."

John F. Wasik is a Bloomberg News columnist.