This section may seem silly at first glance. It reminds us of the old story about the guy who's credit was so bad, that when somebody stole his identity, they felt so sorry for him they gave it back.

You may feel that way about yourself. Your current credit report may actually back you up. But the fact is, anybody could be the victim of identity theft. What is more, many of the people who are experiencing credit problems are people who never made a late payment in their lives until someone actually did invade their privacy and steal their identity.

So what is this new crime called identity theft, and how does it work?

What Is It?

In its simplest form, identity theft happens when someone impersonates you in a credit transaction or several transactions. They use your social security number or other identifying information to obtain credit in your name. It could be credit on a record club account, a department store, a car or even a house. The more sophisticated the thief is, the more they are able to steal. The credit bureaus will tell you that your information is secure, but the fact is nothing could be further from the truth.

You may ask yourself how these identity thieves get your private information. Some of them actually go through garbage and look for credit card receipts, tax records, bills and the like; documents that may contain just enough information for them to impersonate you. They then take that information and open accounts in your name. If you have ever opened an account on line before, you know just how easy it is to do it. If you just verify some basic information you can open virtually any kind of account. There really is no protection if you provide the right answers. This is the essence of identity theft. The more information you make available to others, the more vulnerable you are.

How Does This Hurt Me?

Once someone is successful in stealing your identity, they are able to continue to re-create your identity… much the same way you do. One account allows you to open another. They start getting the same credit card offers you get. The same mortgage offers.

In effect the turn into your alter ego. Depending upon how good they are at it, they can actually replace you in the credit system. They are often able to forge official documents like driver's licenses or even passports, and create huge credit debt in your name as if you were the person doing it. Unlike you, however, they have no intention of paying off the debt. They leave that up to you.

Usually, the victim of this crime does not know it is happening. Until they try to apply for credit and are denied because of late payments or excessive accounts. Or until one of their accounts are cancelled. Or until they start getting calls from collection agencies demanding that they pay up. Or much worse, until they are served with a lawsuit over a debt they never incurred.

This can be the beginning of a nightmare that never ends. Because even though you may be the victim of this crime, there is little help for you. This is one of the few crimes that leave it up to the victim to prove his innocence. In the eyes of the credit industry, if it appears on your credit profile, it must be true.

Another complication of identity theft may be criminal prosecution. Many victims of this crime have had their identities completely transferred to another person, and it is sometimes impossible to prove that they actually are the victim. These cases are rare, but do exist. In extreme situations, the thief passes bad checks, opens fraudulent accounts and commits financial crimes that could lead to prosecution. Often, the victim is not aware of this activity until he is arrested or sued in civil court for outstanding damages or fraud. The consequences can be devastating to a law abiding citizen. And while you may be innocent until proven guilty, victims of this crime will tell you that they are treated otherwise.

What Can I Do About It?

When you suspect you are the victim of credit theft, the first thing you must do is call the police and file a complaint. They may refer you to special detectives assigned to handle this kind of crime. Without a police report on file, there is probably nothing you can do to reverse the effects of identity theft.

The next step is to contact the credit reporting agencies. All three of them.
Tell them that you have been the victim of identity theft. They will put an automatic security hold on your credit accounts. This can be inconvenient, but it is necessary to protect you. You may find that when you attempt to use your credit cards, the store may be asked to call the bank and verify that you are actually the cardholder. It may also be more difficult and time consuming to obtain credit. The safeguards put into place may seem unreasonable, but the alternative is much more of a problem.

Finally, as is the case in most credit related issues, be diligent. Review your credit for unusual or unauthorized activity frequently. We recommend at least once per year, but the more often you review your profile the safer you will be. If you see an entry that does not seem familiar to you, do not hesitate to contact that creditor and report the account as fraudulent.

In theory, you are not responsible for fraudulent accounts opened in your name, but the expense and time spent trying to clear your name far outweighs that convenience. When it comes to identity theft, prevention is the best medicine.

Monitoring your credit is the best line of defense.