from Wired News 06/29/2005
ID Theft: What You Need to Know
No. Card theft is technically not the same as identity theft. Card theft occurs when an unauthorized person uses your credit card number from an existing account to make purchases. True identity theft occurs when someone uses your personal information -- such as your Social Security number, birth date, mother's maiden name -- to impersonate you and apply for new credit accounts in your name. Identity thieves can also use your Social Security number to obtain work, which means that income they earn could be reported to the IRS as your income.
How do thieves get information to use my credit card or steal my identity?
Most credit card thieves still get information the old-fashioned way -- by stealing a purse or wallet, sifting through documents in a mailbox or Dumpster or skimming cards. Skimming occurs when employees in retail business or restaurants, for example, swipe credit cards twice -- once using their employer's credit card reader and a second time using their own reader. Insider theft also occurs when employees of companies or agencies that process documents containing Social Security numbers and other sensitive data steal it. A relatively new way to steal massive numbers of credit card numbers involves hacking databases, such as occurred in a recent incident involving a credit card processing company in Arizona. In that case, a thief or thieves accessed information for about 40 million credit card accounts. Identity thieves can get information the same way -- by hacking data brokers such as ChoicePoint and Lexis-Nexis -- or by obtaining Social Security numbers by sifting through public records, some of which are available online.
How will I know if my identity has been stolen?
You may not know. If you lose your purse or wallet or someone steals them, you may see fraudulent activity appear on your monthly credit card statement. But you may not know if a thief has stolen your identity and applied for new credit accounts in your name. That's because monthly account statements will likely be mailed to the thief's address or a post office box. You'd discover the problem the next time you tried to rent an apartment, buy a car or apply for a credit card or loan and got turned down due to a bad credit rating caused by unpaid credit card charges racked up by the thief.
If someone charges my card will I have to pay for the items they buy?
Federal law limits a cardholder's liability on fraudulent charges to $50. The card issuer -- Visa, MasterCard, Discover -- has to pick up remaining costs. Generally, card issuers will wave the $50 as well since they don't want to discourage people from using credit cards. A few card companies have zero-liability policies, which means that cardholders don't have to pay any fraudulent charges.
If someone steals my identity am I responsible for charges they make on new cards in my name or other damages they cause?
No. The same law mentioned above applies in this case. But you'll be saddled with the hassle of trying to clear your name and restore your credit, which can take years.
What should I do if my wallet or purse is lost or stolen?
Immediately contact all three credit reporting agencies -- Equifax, Experian and TransUnion -- and have them place a fraud alert on your account. This means that companies issuing new credit accounts in your name will have to call you to obtain permission first. The alert will last for 90 days only. You can extend the alert to seven years, but only if you've been a victim of identity theft and can provide a police report.
In addition to contacting the credit reporting agencies, you should file a police report if your property was stolen. Close any accounts that you think may have been compromised by the loss or theft. The FTC provides more information and a chart to tick off steps you should take.
What can I do to prevent myself from becoming a victim?
There isn't really anything you can do to prevent identity theft. As long as Social Security numbers are used for purposes other than Social Security, you are at risk of having your identity stolen any time someone has access to documents that carry your number and other personal data. There are, however, things you can do to lower your risk of becoming a victim.
Review monthly financial statements carefully for fraudulent activity.
Request a free copy of your credit report from a credit-reporting agency once a year to examine it for fraudulent activity. A new law requiring credit reporting agencies to provide a free annual report goes into effect nationwide in September. Until then, it's in effect only in western and Midwestern states. The credit report will show who requested access to your credit record. Look for requests from companies you haven't done business with and tell credit-reporting agencies if you see credit accounts that you didn't open or debts you didn't incur. Check to see that your name and address are correct.
Don't give your Social Security number to any business that doesn't really need it.
Cross shred sensitive documents. Thieves have been known to piece together strips of paper that are shredded only once. Cross-shredders double-shred documents.
Shred pre-approved credit-card offers before tossing them in the garbage.
Don't store sensitive personal information, such as bank account numbers and passwords, on home computers or handheld devices.
Install a firewall and anti-virus software on your computer and keep the virus definitions up to date to prevent viruses and Trojan horses from infecting your computer and feeding personal information back to hackers.
Don't fall for phishing scams. Phishing occurs when someone sends you an e-mail purporting to be from your bank or other company you do business with and requesting you to update your account information.
Use specially designed software programs to clean data from your computer before you sell or discard it. Simply deleting files will not remove data from the memory.
Don't carry any documents in your wallet that have your Social Security number on them, including your medical card or military ID, on days when you don't need the card.
Opt-out when your bank or other financial institution requests permission to share information about you with other businesses.
Close all credit-card accounts except the one or two that you really need.
If you are an identity theft victim and live in one of ten states, including California, Colorado, Louisiana, Maine, Texas, Vermont or Washington, consider placing a "freeze" on your credit report so that no one can access it without your permission. More than 20 additional states are considering passing similar legislation. Creditors need to look at your report before granting you credit. By freezing your report, it will prevent unauthorized people from seeing your personal data and it will prevent creditors from opening a new credit account in your name for an impostor. Some states only let victims of identity theft freeze their records. Other states allow anyone to freeze their record. The State Public Interest Research Groups maintains a list of states with freeze laws.