Credit Fraud: What It Is And How To Avoid It

Posted 16/3/2022 by Linda Myers

Everything related to finance attracts criminals in one way or another. Of course, criminals are different: someone steals a wallet in a store, someone steals money from companies, and someone trades in credit fraud. And if we have already learned to keep track of wallets, and not everyone has their own company, then credit fraud, unfortunately, can overtake any of us.

What is credit fraud?

Credit fraud is the illegal exploitation of another person's identity and credit history to obtain a loan or make purchases using a credit card without having any intention of paying back the debt.

Identity theft in the form of credit card fraud is the most common. In 2019, more than 270,000 Americans reported new or ongoing account fraud to the Federal Trade Commission.

Usually, credit fraud victims end up with unpaid debt in their name. Although this can be resolved in the end, the procedure requires time and work, may temporarily lower credit ratings, and may make it more difficult for a person to get new credit.

Types of credit fraud

There are many forms and types of credit fraud. However, there are a few basic, most common types.

The kind of personal data utilized to pretend to be the victim. Among the various pieces of personal information that can be used to commit credit fraud are stolen credit cards, account numbers, usernames, and Social Security numbers.

The method used to steal personal data. The theft of your driver's license (which can be used to request birth certificates and other information), mail, credit cards, or lists of information obtained through data breaches are just a few ways that criminals can obtain your personal information. Other methods include phishing scams carried out via phone, email, or social media.

A loan of this kind was gained illegally. Identity thieves use a variety of methods to hijack credit, such as opening up new loans or credit card accounts in your name, taking control of existing credit card (or bank) accounts by changing mailing addresses and passwords, using stolen credit cards or account numbers to go on shopping sprees, opening one or more accounts in the names of your minor children who otherwise wouldn't have personal credit reports, and linking your name to another consumer's credit history.

How to protect yourself from credit fraud

The big problem with credit fraud is that criminals' methods are constantly changing, evolving, and improving. This makes them harder to catch and increases the chances of people being robbed. Therefore, it is extremely important to protect your credit information and personal data.

Here are some simple ways to protect yourself from credit fraud:

Keep your skepticism. Exercise caution when someone asks to send sensitive information over email, phone, text, or instant message. Even if the message seems to be coming from a reputable source, the organizations that you frequently interact with already know your account numbers and wouldn't ask you for them, even if they were trying to confirm your identity. If you're in doubt, get in touch with the appropriate company by phone or through their web profiles to confirm the communication is legitimate.

Secure browsing. Make sure your browser's connection to the retailer is encrypted and safe while shopping online (look for a "https" at the start of the web URL), and minimize using open public Wi-Fi networks (those without passwords), which thieves can show the data flow and trawl for sensitive information.

Defend your privacy from curious eyes. Use credit cards with data chips whenever you can, as they are harder to skim than swipe-only cards. Be careful to shield the keyboard when entering your account PIN.