Credit Fraud and Your Credit Reports

Your credit report is the best tool you have to prevent credit fraud.

Credit fraud is one of the most common types of identity theft in the world. The good news is it’s also one of the easiest forms of ID theft to catch. And the best tool that you have to spot fraud is your consumer credit report.

What is credit fraud?

Credit fraud refers to any fraudulent use of a credit in your name. There are two basic types of credit fraud:

  1. Misuse of an existing account. This is the number one most common form of identity theft. Someone gets access to a credit card account and makes charges without your authorization.
  2. Opening a new account in your name. This type of credit fraud usually shows that you’re the victim of Social Security identity theft, because someone must use your Social Security number to open a loan or credit card in your name.

Misuse of an existing account is easy to monitor for and catch. Most major creditors and banks offer complimentary fraud protection. If they see transactions being made on your  account that seem suspicious, they’ll notify you via text or email. Then you just call in to verify the transactions. If you don’t recognize them, then they immediately freeze you account.

If you have smartphone apps for your bank account and credit cards, you can also set up payment notifications. You receive an alert every time there’s a charge on your account. You can catch fraud as it happens and contact the creditor immediately.

Your credit report is the best line of protection against fraud

While technology makes it fairly easy to catch account misuse for your credit (and debit) cards, your credit report is the best line of protection to catch accounts you don’t recognize and didn’t authorize.

If someone gets your Social Security number, they can use it to open new credit cards and loans online. If they have correspondence to accounts they control, you wouldn’t know these accounts exist unless you check your credit report.

By law, you can review your credit report for free once every twelve months, through One of the first things you should look for is accounts your don’t recognize. This means someone has opened an account in your name, and your Social Security number could be compromised.

You can also look for other signs of credit fraud that may not have been caught by the fraud protection on your account. If an authorized user or cosigner runs up debt on an account without your knowledge, fraud protection may not flag it as suspicious. But it’s still fraudulent if you didn’t authorize the use. If it’s not an account you use often, it may have even gone to collections without your knowledge. Collection accounts will also show up on your credit report.

Credit monitoring gives you year-round protection

Although you can review your credit report once per year for free, this leaves a lot of room for identity theft to occur between those annual reviews. If you want more protection, then a credit monitoring tool will give you 24/7 year-round protection with credit report alerts. Once you set up credit monitoring, the tool will notify you anytime there’s a change in your credit report.

This allows you to be immediately notified if there’s a new account or collection account that’s listed in your name. Then you can use the tool and check your report right away. If you don’t recognize the account, contact the creditor or loan servicer immediately to report that it’s fraudulent.

Using credit freezes to prevent fraud

As of October 2018, credit freezes became 100% to place nationwide. All three credit bureaus allow you to freeze and unfreeze your credit for free. When you freeze your credit report, it stops pre-approved credit offers and prevents all credit checks on your report.

You get a unique PIN number, so when you need to authorize a credit check yourself, you use the PIN to unlock your report. The lender or creditor can run the check so you can open a new loan or credit card. Then you lock your report back again.

If your report is locked, then cyberthieves can’t open accounts in your name. This is one of the best ways to prevent new account credit fraud before it can happen. Just be aware that it can take a few days to unfreeze your report. So, plan ahead when you need to open an account. Another good side effect of credit freezes is that you can’t open accounts on impulse, such as signing up for a store credit card at the checkout of a retailer.