Financial Privacy And Identity Theft

As more and more people rely on the Internet for banking, shopping, and everyday interactions, the dangers of online privacy only seem to grow worse. Nearly everyone has heard stories from a friend or relative who has either had their identity stolen or been a victim of online fraud. If you want to protect your finances and your credit rating, it's important to be aware of what identity theft is and what you can do to prevent it.

What is a Stolen Identity?

Over 2 million people were victims of identity theft in the United States last year. Although this number varies depending on how you define "identity theft," the number has been increasing annually since 2000.

When an identity is "stolen," what basically occurs is that another person uses your banking information or social security number to tap into your credit to open accounts without your authorization or knowledge. Because this can go on for months or even years before you become aware of it, there is the potential for tens of thousands of dollars to be charged in your name.

How to Prevent Identity Theft

Although there is no way to completely avoid identity theft, you can take a proactive approach to monitoring your credit. This is a smart way to not only avoid complications, but also to practice good money sense for the future.

- The original theft may have occurred from any number of sources, including pay stubs, financial documents, mail, or stolen purses or wallets. It's best to shred all documents containing your personal information, keep your mailbox in a secure location (or lock it), and to cancel all the cards from a lost or stolen wallet immediately.

- Regularly check one of the three major credit reporting agencies (Equifax, Experian, and TransUnion) for changes to your credit. Anything that looks suspicious—including accounts you didn't open or credit you don't recall applying for—should be investigated immediately.

What to Do if Your Identity is Stolen

If you discover that you have been a victim of identity theft, the most important thing you can do is act quickly. The longer you wait, the more financial damages that will occur, and the more difficult it will be to repair those damages for the future.

Contact your local police department. Identity theft is like any other theft, and it must be reported to the proper authorities. The sooner you get the theft on the record, the better.

Keep records of every police report you file. Financial institutions and credit card companies will make you undergo a rigorous process to clear you of the charges. Keeping good copies from the start will go a long way in facilitating this process.

Fill out an ID Theft Affidavit. These documents are much like the police reports, in which it allows you to document the issue as efficiently as possible. Consider a fraud alert or monitoring service. Many of these cost around $5 per month, and will immediately notify you of any changes to your credit score - both the ones you make and the ones made by potential thieves.

If you've been a victim of identity theft, or if you're concerned about it happening to you, you may want to consider seeking the assistance of a financial advisor. Your advisor will be able to help you set up a monitoring system to prevent future damages and begin to repair your financial situation and get you back on your feet again.