Fraud costs the American economy millions of dollars per year in losses. Between January and December, 2006, the Federal Trade Commission received over half a million consumer fraud identity theft complaints, with losses of over $400 million reported. The losses affect consumer savings accounts, retirements and the ability to purchase homes. Bank accounts have been emptied with no recourse. Increased e-commerce from the rise in Internet use has opened the doors for easier fraud perpetration. While companies involved in information technology have invested in increased security, fraud prevention is a continuing battle requiring the awareness of both consumers and businesses. The good news is that there are simple steps you can take to help prevent unauthorized access to your information and finances. Although fraud can take many forms, our advice will be mainly focused on the types that most affect credit reports and scores.
Common types of fraud
1. Identity theft: Identity thieves gain access to information that allows them to pose as someone else. They may steal boxes of checks, bank statements or other mail from a mailbox; steal a wallet or purse and use the information to open new accounts, as well as spend on existing credit cards or checks; or extend a fraudulent offer to you via phone or mail. Many people who have had their identities stolen have not found out until the next time they try to open a new credit account, or apply for a home or other type of loan.
2. "Phisher" or mock websites: This is a rather new phenomenon, where perpetrators duplicate a website and send emails requesting that a customer reapply or provide security information. The information is then used to steal the consumer's identity, access bank funds, or apply for fraudulent loans. The phisher site spam emails tell consumers to click on a link to what looks like a real corporate website and input their personal information. The fake website looks like it comes from a legitimate company with whom a consumer may have a relationship, but the fraudulent site is really just a vehicle to steal consumer information.
3. Social Security Fraud: This happens when someone gains access to a Social Security number and uses it, along with other personal information, to commit fraud or identity theft. Social Security numbers of deceased or retired persons via their Social Security checks, along with an address, can allow someone to apply for credit reports that often contain enough additional information for a perpetrator to take the next step.
4. Intercepting credit card numbers from online transactions or databases: When consumers buy goods or services over the internet, it's rare to have the credit card information transferred without encryption, or coding, to prevent hacking. But there are still some cases where computer hackers gain access to information as it is sent. Hackers also search for weaknesses in databases maintained by businesses, government and financial institutions, and attempt to exploit them to gain account numbers. The incidence of breaking into these databases is not high, but one access breach can give perpetrators access to thousands of account numbers at once.
5. Mishandling of credit reports: Credit reports contain all the information a thief would need to steal using existing accounts, or to steal one's identity completely and cause major financial harm. There are several ways those in the credit reporting industry manage to balance the need for accurate account information to rate, while keeping enough information hidden to protect the public from theft. Strict compliance regulations from bureaus and the government require credit report users to have passed many hurdles to begin ordering and using credit reports. In addition, account numbers are partially masked on copies assessable to consumers. Data security standards are extremely high, and audits are frequent.
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