How to Protect Your Credit from Scams

Protecting your credit from scams is an ongoing battle. If you’re feeling overwhelmed, you’re not alone. Research shows people aren’t as savvy at identifying scams as they think they are. Plus, you don’t always have control over who has access to your sensitive information.

This month I have a guest blog post from Marguerita Cheng, CFP®, Chief Executive Officer at Blue Ocean Global Wealth. Rita shares her insights and tips on what we can do to help protect ourselves, our children, and our parents from credit scams. You can also tune in to Episode 006 of my podcast to hear Rita and I talk about the different types of scams and what one can do to protect themselves.

Scams can happen to anyone – even parents & children. If it sounds alarming, it’s because it is. According to a survey by identity-theft company LifeLock, nearly one in four people experience identity fraud. Consider the effects of fraudsters hacking into large companies to steal massive amounts of data, such as the Equifax data breach. This startling event in 2017 exposed the personal information of over 147 million people.

Knowing how to protect yourself and safeguard the credit of your parents and children can go a long way to protecting your credit from scammers.

Common Scams You Need to Know

Identity thieves know how to exploit your data to their advantage. To protect yourself, you need to know how fraudsters look for your personal information.

IRS scams are a common type of telephone scam due in part to the Equifax breach that exposed records containing Social Security numbers. But it’s unlikely the IRS will call you. Most often, they’ll contact you by mail through the United States Postal Service. If you receive a call from someone claiming to be with the IRS, don’t give out your Social Security number or any other sensitive information.

Mail theft is one of the oldest methods of fraud. If someone takes your mail, the financial account information on your bank or credit card statements could put you at risk. A thief could change your address on statements to have your mail redirected or open new accounts in your name.

Although often affecting the older generation, sweetheart scams are more common than you might think. Scammers set up fake profiles on dating sites and social media and convince victims to send them money.

The trouble with scams is you rarely find out about it until after the damage is done. By the time you realize there’s a problem, the fraudster may have emptied your bank account, used an existing credit card, opened a new credit card in your name, or applied for government benefits with your Social Security number.

How Can You Protect Your Credit?

Thieves and hackers can strike at any time to exploit weaknesses. While you’re unlikely to remember every store or the websites you visited, there are measures to safeguard your information. The more layers of protection you have, the better off you’ll be.

Common Sense Strategies

The best protection from scams is prevention. If your sensitive information doesn’t get into the wrong hands, there’s little chance you’ll become a victim. You can’t thwart every attempt because some data breaches are out of your control. However, a few common-sense strategies can go a long way to keeping your credit safe from fraudsters.

Here are a few things to consider:

  • Approach unsolicited telephone calls with caution even if it sounds legit
  • Be wary of sharing your information over the phone, online, or by email
  • Don’t write your Social Security number on checks
  • Always keep your wallet and purse where you can see it
  • Don’t carry your Social Security card in your wallet
  • Leave credit cards you don’t use at home in case your wallet is lost or stolen
  • Never share personal information on social media sites

While most of these precautions make sense, sharing personal information by answering “getting to know you” quizzes on Facebook and other social media sites has become commonplace.

You should never disclose your date of birth, mother’s maiden name, or the name of your first pet because companies can use that information for security questions to verify your identity when accessing financial accounts online. Plus, that data could lead to a fake account in your name where scammers exploit your online “friends.”

Set Up a Credit Freeze

A credit freeze can stop new creditors from accessing your credit reports. It’s free to do and puts a padlock on your credit. Without access to your report, identity thieves can’t open financial accounts in your name.

You must contact each of the three major credit bureaus to set up a credit freeze.

  • Experian: Access a credit freeze on their website or call 1-888-397-3742 to request it by phone.
  • Equifax: Visit the online freeze center, call the automated phone line at 1-800-685-1111, or contact customer care at 1-888-298-0045.
  • TransUnion: Place a credit freeze online or access the automated phone system where you can opt to speak to a human at 1-888-909-8872.

Keep in mind a credit freeze also blocks you from opening new accounts, though lifting the restriction isn’t hard to do. Contact the credit bureaus to suspend the freeze if you’re applying for a loan or credit card. When you’re finished with the credit process, ask the bureaus to resume the credit freeze.

Monitor Your Credit Report

Every credit account you’ve ever had can be found on your credit report. The information it contains includes the date you opened the account, the current balance, and the payment history. If a fraudulent account is opened in your name, it will appear on your report. Equifax, TransUnion, and Experian have options to buy your credit report but federal law allows you to get a copy for free.

To get a free copy of your credit report from all three bureaus, visit AnnualCreditReport.com. As you’re reviewing your history, check to make sure your name and address are accurate and that you recognize all the accounts that appear on your report. File a dispute immediately if you find something that doesn’t look right.

Sign up for a free credit monitoring service through a site like Credit Sesame or Credit Karma to add another layer of protection. It doesn’t cost you anything to set up an account, and you get free credit monitoring alerts and fraud resolution assistance.

Have an Identity Theft File

Take an active approach and create a file of critical information in case your wallet is lost or stolen, or you become the victim of a scam. Your “identity theft file” could include your credit reports, security freeze documents, account passwords, breach notices, and printed copies of your driver’s license and cards that you carry in your wallet. If a scammer gets your information, you’ll have everything at your fingertips to repair the damage as quickly as possible.

Stop Unsolicited Credit Card Offers

If you’re like most people, you receive many pre-approved credit card offers in the mail every week. But there’s no need to continue to receive them if you’re not in the market for new credit. Opt-out of pre-approved offers by visiting OptOutPrescreen.com or calling 888-567-8688. You can request to stop unsolicited offers permanently or for a period of five years.

Not only will eliminating credit card offers in your mailbox reduce waste, but it can also decrease your chances of being a victim of identity fraud through mail theft. If you change your mind, you have the choice to opt back in and start receiving pre-approved credit card offers by visiting the same site.

Review Statements Often

Reviewing your financial account statements when they come in the mail at the end of the month can help you spot errors. But a better option is to look at statements and account activity online several times throughout the month. This way, you can report any suspicious activity and mitigate the damage that’s done to your credit.

Should You Worry About the Credit of Your Children?

As awful as it is to think about, your child’s credit could be a target for scammers. The credit of your children could be a bigger risk than you realize because they have a spotless credit record, making them ideal victims. If this happens, you might not know about the crime for years until your child does something that calls for a credit check, such as applying for a job to trying to open a credit card.

If your child is old enough to be online, review online safety measures with your children. Teach them about internet etiquette and instruct them not to share personal information on social media or through instant messaging services.

To protect the credit of your child at any age, watch for:

  • Bills or credit card offers that come in the mail and are addressed to your child
  • Denial notices for government benefits because your child’s Social Security number is being used on another account
  • A letter from the IRS stating your child didn’t pay income taxes
  • Collection calls for products you don’t recognize

You can also contact the credit bureaus to ask if they have a credit file for your child, though this should only be done if you suspect child identity theft. Multiple inquires can create problems for your child down the line.

Protecting Your Parents from Being Scammed

The older generation often considers their finances a private matter and might be reluctant to talk to you about it. But changes in behavior can show your parents are being taken advantage of. Some warning signs to watch for include becoming withdrawn, appearing unkempt or afraid, making unusual withdrawals from a bank account, and unpaid bills piling up despite sufficient income.

If you have concerns, there are steps you can take to protect them from being ripped off.

  1. Talk to your parents. Pretending the problem doesn’t exist will only make it worse. Remember to approach the subject with caution and avoid lecturing. Asking an open-ended question such as “Mom, have you heard about the latest IRS scam?”
  2. Swap the landline for a cellphone. Unsolicited calls are less likely to happen on a cellphone. If your parents don’t mind giving up their landline, switching to cellphones can cut down on the number of scammers that call. The National Do Not Call Registry from the Federal Trade Commission can reduce unwanted calls, too.
  3. Monitor the mail. An excessive amount of sweepstakes offerings and pre-approved credit card offers could mean your parents are on several “junk mail” lists. You can unsubscribe them from credit card pre-approvals by opting out at OptOutPrescreen.com.
  4. Use direct deposit. To stop fraudsters from stealing checks out of the mailbox, set up direct deposit for your parents’ Social Security benefits, pensions, and other sources of income.
  5. Invest in a shredder. Identity theft is big business. Buy a shredder to safeguard your bank records, credit card statements, and other documents with sensitive information to help protect your parent from becoming a victim.
  1. Check credit reports. Federal law allows everyone in the U.S. access to a free credit report once per year. Visit AnnualCreditReport.com to get a copy of your parents’ credit history from Experian, Equifax, and TransUnion. Look for errors and unfamiliar credit accounts and file a dispute right away if something looks questionable.

What if You Are Already a Victim?

You might feel embarrassed and scared if you find out you fell for a scam. Remember that one in four people can become identity victims, and it can happen to anyone. The sooner you report the scam, the sooner you can stop the damage and repair your credit.

Errors on your credit report must go through the dispute process. Contact the credit bureaus to make them aware of the error and follow up on your claim to ensure it gets resolved to your satisfaction.

If your credit card was compromised, you must take action fast. It doesn’t matter if you lost your card, your wallet was stolen, or if you gave out your credit card number to a suspected scammer. Call your bank or credit card company as soon as you realize your information has fallen into the wrong hands. They can put a hold on your account to stop transactions from coming through.

If a new credit card appeared in your mailbox, contact the issuing company right away. Ask to speak to their fraud department and let them know you didn’t apply for the card. They’ll cancel the account and have it removed from your credit report.

Regardless of the scam, file a police report to document the incident. This is important if money was stolen from your account. The financial institution and credit bureaus will probably ask for a copy of the police report, so file one as soon as possible after you’ve been scammed.

Consider putting a security freeze on your credit report to protect yourself from new accounts being opened without your consent. A fraud alert can also be helpful to protect your credit from scams. With a fraud alert, a note is added to your credit file saying you’ve been the victim of fraud.

You could purchase identity theft insurance to protect yourself from financial loss. The money you spend on the insurance policy isn’t always worthwhile since it doesn’t cover the money that might be stolen from you. It can reimburse you for the loss of wages, notary fees, public records searches, and certified mailing fees. But the U.S. Department of Justice reports only 13.8% of identity theft victims have out-of-pocket costs so it might not be worth the cost.

Scams can lead to fraudsters opening new accounts in your name and racking up huge debt. However, the most common ones involve the unauthorized use of an existing credit card or bank account. There are measures you can take to safeguard your credit from scams but there’s no foolproof method to guarantee you won’t be a victim. The best protection for your credit is to be vigilant about keeping your data private and be suspicious of unsolicited calls.

Want to know more about credit scams and how to protect yourself?

Tune in to Episode 006 of my podcast to hear Rita and I talk about the different types of scams and what one can do to protect themselves.

Have a Question?

Send me an email at Luis@onmywaytowealth.com and let’s get started on pursuing your financial goals together. To get bi-monthly financial tips for Gen Xers sign up for my newsletter and subscribe to the podcast.

Investment Advisor Representative of Retirement Wealth Advisors Inc. (RWA), 89 Ionia NW, Suite 600, Grand Rapids, MI 49503 (800) 903-2562. Investment Advisory Services are offered through RWA. Build a Better Financial Future and RWA are not affiliated.

This information is designed to provide general information on the subjects covered, it is not, however, intended to provide specific legal, medical, or tax advice. You are encouraged to consult your tax advisor, doctor, or attorney.