Credit & Identity Theft Blog

  • Are You Recession-Proof?
    December 4, 2008
    Credit

    What's the big deal?

    It's all over the news, but you personally are not feeling the effects of the bad economy. You're still getting a steady paycheck. You're not swimming in debt. You don't own a home or, if you do, it hasn't dropped significantly in value. You don't play the stock market, or you're fairly comfortable with the dip in your 401k because retirement is light years away. And, bonus!—gas prices are at a 4-year low. 

    Good time to buy!

    If you happen to be one of the lucky ones, congratulations. And the truth is, the news might just keep getting better for you. Everything is pretty much on sale right now—homes, cars, gas, stocks, and even many of the items on your Christmas list have all dropped in value. So it can be a great time to buy. Extra points go to those with good credit scores: You'll likely qualify for mortgages and auto loans at low interest rates.

    Be warned...

    Before you get too excited, though, know that no one is completely recession-proof. There could be a 1 in 10 chance that you (or your head-of-household) lose a job. You may think you're safe, but the reality is that many businesses are making tough decisions right now and cutting your position could be one of them. The current unemployment rate is 6.5%, but many project that figure to rise to 9%, 10%, or 11% in 2009. Even if you do hold onto your job, you may be asked to work extra hours, take a cut in pay, or forego a yearly raise or bonus.

    Be prepared.

    So it's a really smart idea to be prepared for a decrease in earnings. Pay down your credit card debt and keep a liquid savings account to act as cushion if needed. Make sure your credit card company isn't planning to hike your interest rate or, better yet, try to negotiate a lower rate (this will be easier if you have good credit history). And don't go on a spending frenzy just because that 60" LCD you’ve had your eye on has dropped in price and Best Buy is offering 0% financing. Be smart with your money and don't accumulate more debt unnecessarily. Practice these principles in both good and bad economic times, and you'll be just fine.
     

  • Week in Review: 11/17/2008
    November 21, 2008
    Credit
    Each week we bring you the latest news stories and information about credit, personal finance, and identity theft. Visit us every Friday for new ways to manage your credit and protect yourself from fraud.

    880,000 bankruptcies have already been declared this year, up almost 7% from 2007 (and we're not even into December yet). If you're considering filing bankruptcy, you'll need to know the difference between Chapter 7 and Chapter 13, and what to expect throughout the process. Of course, bankruptcy should only be pursued as a last resort, as it can take more than a decade to recover from. 

    A slumped economy and a holiday spending frenzy are never a good combination for your wallet. This year, prevent a credit hangover in January by coming up with a sensible spending plan for December. Find unique, thoughtful gifts for loved ones other than the latest tech gadgets or expensive luxury items. You might also consider going on a debt diet at the same time. Find the method that works for you to get out from under those credit card bills. Why wait until the New Year to start working on your financial resolutions?

    Members of the U.S. military are more susceptible to having their identities stolen, largely due to frequent moves (which dictate a reliance on remote access to financial services) and carrying their Social Security numbers with them at all times (making the digits easier to steal). Lately, U.S. soldiers stationed in the UK are especially vulnerable to the crime. While the Secret Service and other authorities are holding the exact number of cases close to the chest, they do admit a significant increase over last year.

    Another identity theft ring is broken up, this time in North Carolina. Authorities arrested three men and one woman who had stolen thousands of pieces of mail from over 300 mailboxes in Pender, New Hanover, and Bladen counties. They were using the personal information found on bank and credit card statements to make purchases, open accounts, and even obtain property.

    As the economy continues to plummet, cases of credit card fraud, counterfeit checks, and phishing are on the rise. College campuses are no exception. The Texas Tech Federal Credit Union and Tech Police Department in Lubbock offer assistance to students who have had credit cards stolen. And credit experts hosted a financial aid workshop for students at the University of Florida discussing the pitfalls of credit cards and ways to protect yourself from identity theft.

  • Visa Cards Go Hi-Tech
    November 18, 2008
    Identity Theft

    Reading creditcardforum today, I see that Visa has joined forces with Emue Technologies to launch its latest attack against identity theft: a credit card embedded with a microprocessor, a 12-button keypad, and an 8-digit alpha-numeric display. Cool in a James-Bond kind of way, the display generates a one-time-use security code after you type in your PIN number on the keypad. When making online and over-the-phone purchases, this unique code proves to retailers that you are indeed the card's owner. Stolen credit card information will be rendered useless whenever a security code is required, unless the fraudster somehow also has your PIN (tip: don't use your birthday).

    There are some potential downsides to the card, though. I'm guessing it's not waterproof, so make sure to take it out of your pants pocket before doing the wash. And don't bend it, which might crack the screen. Card replacements will be necessary every three years when the battery dies. Online stores will also have to adapt by making sure their checkout process accommodates the new capability. If a retailer does not require a security code, or has no way of authenticating one on the spot, then the technology is pretty much useless.  

    But the card is still a good idea and should successfully curb a significant amount of "card-not-present" fraud. It's currently being tested through four European banks, and, if successful, will be in wallets around the world by this time next year.   

    Video Example #1

     Video Example #2

  • To Cancel or Not to Cancel Credit Cards
    November 17, 2008
    Credit Report

    With all of the information out there about credit scoring, it's hard to know if cancelling credit cards will be good or bad for your credit health. It might seem like a no-brainer to close out credit cards that you haven't used in years, but the truth is, it's usually better to keep them open.

    First of all, you should know that just because you cancel a credit card does not mean it drops from your credit report. A closed account will stay on your report for years to come. So cancelling a credit card with a negative history is hardly like waving a magic wand to make it disappear. Only time can do that.

    So if credit card accounts remain on your report whether you cancel them or not, what’s the harm in cancelling them? Two answers: Length of credit history and a little term called utilization.

    Length of Credit History

    The key to a strong credit score is to build up a nice, long history of good credit. Lenders love a consumer with a lengthy proven track record of paying down debt in a timely manner. So it makes sense to keep that first credit card you got as a college freshman back in 1982, especially if the account is in good standing. By keeping the card, even if you never use it, your credit history spans almost three decades. And since length of credit history accounts for 15% of your credit score, that Banana Republic card you opened in 2006 just can’t compare.

    Utilization

    The other reason to keep credit cards open is to maintain a healthy credit utilization rate (otherwise known as your debt-to-credit ratio). Basically, the idea here is that it's better to have more credit available to you than less. Credit bureaus tend to drop your credit score if you're using too much of your available credit.

    Example: Say I have three credit cards with different credit limits of $8,000, $10,000, and $15,000. I never use the first two, but I routinely have a balance of around $7,000 on the third.  This means I'm utilizing 21% of my total credit ($7,000 divided by my total credit limit of $33,000). If I were to cancel the two cards I don't use, then my utilization rate jumps to 47%, which in turn would lower my credit score. (Note that credit bureaus look at both the total utilization rate as well as the utilization rate of each card, so I'd be better served to keep my balance lower on the card with the $15,000 limit, and let one of my other cards pick up the slack.)

    While the credit bureaus aren't forthcoming with their precise scoring formulas, we do know that lower utilization rates will significantly boost your score.

    Still Want to Cancel?

    If you've already got a low utilization rate (say, under 30%) and are still itching to cancel some of your cards, here are the guidelines you should follow:

    • Never cancel a credit card with a balance. You should always pay off your account in full before closing it.
    • Cancel younger cards before the older ones. As discussed above, you want to keep the cards with the good, long histories.
    • Cancel the cards that charge annual fees or have really high interest rates.
    • Cancel the cards that don't report credit limits. When a credit card company doesn't report your credit limit, the bureaus think you're using 100% of your available credit on that card (which drops your utilization rate). To find out who reports limits, either ask the credit card company directly or just check your credit report.
    • Cancel cards if their open lines of credit are tempting you to spend. It may ding your score a bit, but that’s better than acquiring debt you're unable to pay down.

    Once you've made the decision to cancel a credit card, make sure you do it the right way. Call the credit card company; don't just cut up the card. And make sure they give you a written confirmation for your records.

    Questions or comments? Just post below!
     

  • Week in Review: 11/10/2008
    November 14, 2008
    Credit

    Each week we bring you the latest news stories and information about credit, personal finance, and identity theft. Visit us every Friday for new ways to manage your credit and protect yourself from fraud.

    Credit card companies are handing out less plastic these days. The economy has them reducing credit limits, increasing interest rates, and sending out fewer applications. Check the limits and rates on your cards to make sure nothing has changed. 

    Nova Scotia finally allows online sales of credit reports. Due to a new interpretation of the Credit Reporting Act, Nova Scotians are now able to get their credit reports online along with their fellow Canadians. 

    Identity theft is on the decline, according to a Javelin Strategy & Research Study. 2007 showed a 12% drop in identity theft from the previous year. The study also shows that identity thieves still prefer traditional methods (telephone scams and mailbox raids) to online fraud.

    One misplaced laptop results in 85,000 stolen identities. An employee from North Carolina's Division of Aging and Adult Services had her laptop stolen at a conference last week. It remains unclear if the thief has discovered that the names, dates of birth, addresses, and Social Security numbers of 85,000 seniors reside on the computer's hard drive.

    Beware of identity thieves this tax season. The latest economic stimulus package has identity thieves crawling out of the woodwork, soliciting personal information from those expecting rebates. Be cautious of any phone calls or e-mails from “IRS employees” asking for your personal information; the IRS will never contact you this way. Other tips for filing taxes: drop off your return to a post office rather than an unsecured mailbox or, if filing electronically, make sure your wireless network is secure.

    Follow these 10 tips for safe online shopping. Before you make online purchases this holiday season, make sure you know how to keep your personal information out of the wrong hands.

    Unfortunately, identity theft is often all in the family. Sometimes the ones closest to home pose the greatest threat to stealing your personal information.

     

  • Raise the Red Flag: Businesses Now Required to Prevent Identity Theft
    November 5, 2008
    Identity Theft

    The "Red Flags Rules"

    The government is about to release its latest (albeit somewhat convoluted) attack in the battle against identity theft. The "Red Flags Rules" require any financial institution or business that issues credit—from mortgage brokers to auto dealerships to utilities companies—to identify (or "flag") any suspicious activity that pops up on your account. Any number of things could call for a red flag, like obviously altered or forged documents, fraud alerts placed on credit reports, or sudden excessive spending.

    But red-flagging is just one requirement of the new law. Businesses must also come up with comprehensive identity theft prevention programs that spell out how they'll respond to these red flags. It's not enough to simply earmark possible fraud—they must take action to deter it, like requiring further documentation or denying a credit application altogether. And these preventative measures must be periodically updated as identity theft tactics change and evolve.

    Delay in Enforcement

    The original deadline for full compliance with the Red Flags Rules was November 1, 2008, but the Federal Trade Commission is granting a 6-month delay in enforcement. Businesses that were confused about their need to comply now have until May 1, 2009 to implement the Rules.

    How the Red Flag Rules Benefit You

    While many businesses—especially those with limited resources—aren't excited by the prospect of implementing these new rules (conveniently summarized in a 256-page document), you as a consumer should feel a little bit safer. Your bank or credit card company is now legally responsible for spotting potential fraud and stopping it in its tracks. You may experience more scrutiny when applying for new credit or opening an account, but a few extra security questions should be well worth the additional protection. 

  • Fed’s Annual Report on Identity Theft: Effective Enough?
    November 4, 2008
    Identity Theft

    Is the Government Doing Enough?

    In the past year alone, more than 9 million Americans were victims of identity theft. That staggering statistic begs the question: Is enough being done to protect you from this pervasive crime? The government has just released its annual answer to that question in its 2008 Identity Theft Task Force Report. This report was created by "The President's Special Task Force on Identity Theft"—a group comprised of leaders from 15 different federal departments and responsible for naming and implementing strategies that crack down on identity theft. That's a pretty tall order: Does a bureaucracy notorious for moving at a snail's pace really have a chance against agile, ever-evolving identity thieves? Sure, the task force boasts a 26% increase in the number of convictions of perpetrators between 2006 and 2007, and the number of identity theft victims has decreased almost 6% between the two years. But as identity thieves get smarter and sneakier, can we count on that trend to continue?

    What's in the Report

    The report details what is currently being done and what should be done in the future to protect data, assist victims of identity theft, and increase prosecution of perpetrators.  In total, there are 31 recommendations. These range from small, concrete steps to large-scale policy changes. Included in the mix are directives to:

    • limit the unnecessary use of social security numbers in both the public and private sectors;
    • educate the public about the dangers of identity theft through mailings, brochures, and the internet (mainly through www.idtheft.gov);
    • give grants to organizations that assist victims of identity theft;
    • propose legislation that increases penalties for identity thieves;
    • help law enforcement officials to better understand identity theft and how to assist its victims;
    • and work with other countries to develop identity theft laws that are at least as comprehensive as ours.

    Many of the recommendations have already been put into effect to some degree, while others are still just words on paper. It's encouraging to see the government address the complexities of identity theft, but seems a stretch to think the various federal departments and agencies will be efficient or accountable enough to make momentous strides. The task force report points out that its recommendations are primarily aimed "at improving the federal government's response to identity theft" and that "everyone—consumers, the private sector, and federal, state, and local governments—has a role to play in fighting this crime."

    What More Can Be Done?

    We can't rely solely on the government's efforts to protect us. The more immediate weapon in this battle is the vigilant consumer. Identity thieves will continue to search for and find vulnerabilities in data security systems. And it's nearly impossible to maintain full privacy of your personal information in this day and age. But a proactive consumer can reduce the risk of becoming an identity theft victim by recognizing phone and internet scams, protecting personal information and credit cards as much as possible, and choosing complex ATM and online passwords. It's also crucial to review your credit report regularly and quickly alert the appropriate parties if anything suspicious pops up to minimize the extent to which an identity thief can wreck your credit. Your actions as a careful consumer—coupled with the government's continued efforts—can go a long way in protecting you from identity theft.

  • Nobody Cares if Someone Borrows Your Social Security Number
    September 2, 2008
    Identity Theft

    The Federal government doesn't care.  Employers don't care.  Creditors don't care.  Social security numbers are the "gateway drug" of identity theft.  Once a thief has your digits, a world of wicked possibilities open up.  So, why doesn't anyone care if you are not the only one using your SSN?

    It's the Economy, Stupid

    It's that simple.  Federal law mandates all employers secure a valid SSN from prospective hires.  Tens-of-thousands of illegal immigrants wouldn't be able to work in our country if they didn't "borrow" a legal resident's social security number.  Think about the negative impact on the economy if none of these people worked.  Thousands of businesses would flounder, and billions of dollars would drain from the U.S. economy. It’s not only illegal immigrants who are playing "share the wealth" with your SSN.  Thousands of U.S. citizens are playing this game as well: people with bad credit, no credit, criminal records, you name it -- they get a fresh start with your "clean" personal information.

    From a Trickle to a Drip

    People with stolen social security numbers spend money -- and get loans for cars and houses.  Our already-slowed economy could further stall if all these people lost their (or rather, someone else's) buying power.  So there's not really a problem with some stranger pretending to be you, right?  Everyone deserves the chance to achieve the American dream, even if they need to do it with someone else's identity, right?

    Who's Gonna Clean Up This Mess

    If someone "borrows" you Social Security Number and behaves, you'll likely never know about it.  But when they default on a loan, or owe money from legal proceedings, you're the one everyone will come after.  Even after you prove it wasn't, you're out of luck.  Creditors and law enforcement follow the path to the biggest payoff.  And since your doppelganger has defaulted and skipped town, you're left with a big target on your back.

    Hope for the Hapless

    So who cares then? You do! Don’t let the indifference of other people stop you from protecting your own identity. The only way to fight this abuse is to get a copy of your credit report from each of the three major credit bureaus (Experian, TransUnion, and Equifax).  Do it often, so you can catch any suspicious activity early.  Even then, there's a good chance an ID thief won't show up on your radar.  So that leaves you and me hoping for the continued success of our "social twin."