The Unexpected Costs of Identity Theft

How Can Identity Theft Impact Your Life?

The impact of identity theft generally depends on the type of fraud and how long it takes to be detected. If caught immediately, an unauthorized charge to your credit card can usually be resolved quickly, with the charges reversed—or sometimes even declined before they're approved—and a new card and account number issued on the spot. But if just a little bit of time passes before the account holder, the creditor or a merchant catches on, the same fraudsters could quickly rack up charges and cause other harm that would take more time and effort to reverse.

In more complex cases, identity thieves may open loans and credit cards in your name, file taxes and receive refunds, or use your identity to obtain medical services. In these cases, it can take years to stop the fraud, undo the damages, and restore your identity and credit.

How can identity theft take a toll on you and your finances? Here are four key ways:

• Time and money: Although debit and credit card issuers limit your liability for fraudulent charges, you could still be on the hook for the loss if you don't report phony charges in time. And since time is money, the hours you spend tracking, reporting and resolving the effects of identity theft are also a significant loss. According to a report from the SANS Institute, it takes an average of six months and roughly 200 hours of work to recover your identity after it's been compromised. It may even cause you to have to take time off from your job.
• Criminal record: If someone is using your identity to commit crimes, you could be at risk for legal consequences, including arrest or a criminal record. Proving that your identity has been stolen is one hurdle; getting an arrest record cleared up—even if it's proven to be unjustified—is also a time-consuming challenge.
• Credit damage: Fraudulent charges on your accounts must be reported and resolved. In the meantime, work closely with your creditor to make sure you're meeting your financial obligations. If you fail to make a payment on an outstanding balance, you run the risk of having your payment reported as late or missed. If a fraudster has used your identity to open new accounts, their failure to pay can show up on your credit report and damage your credit score. The loans or credit they've opened also increase your debt amounts and credit utilization, which can affect your credit scores and inhibit your ability to get credit yourself. For the most part, these issues are resolvable, but the process will take some time and effort.
• Emotional distress: Having your identity stolen can be traumatic. In a survey of consumers who experienced identity crime, the Identity Theft Resource Center found that 77% reported increased stress levels and 55% experienced fatigue or decreased energy. Additionally, respondents said they had trust issues with friends and family, and problems with their employers or schools.

How to Prevent Identity Theft

Preventing identity theft is certainly better than having to deal with its effects. No matter how careful you are, it's not possible to avoid all risk. You can, however, improve your chances of avoiding identity theft and fraud by following some simple guidelines:

• Shred all documents that have personal identifying information or use a permanent marker to block it out.
• Stay skeptical when giving out personal information over the phone, especially if the caller is contacting you. If in doubt, hang up and directly call your financial institution or the company the caller said they represented.
• Don't open suspicious-looking email and never click on links in an unsolicited email. You can always log in to an account directly to see if there are outstanding issues.
• Use strong online passwords, stay away from public Wi-Fi, use an anti-malware program and consider using a virtual private network (VPN) to increase your online security.

Detect fraudulent transactions quickly by monitoring your bank and credit card accounts frequently. If your card company offers transaction alerts and/or the ability to turn your cards on and off, you can have even more immediate control over your account activity.

Monitoring your credit can be helpful too. Check your credit report and score regularly for any unexpected changes, including new accounts or activity you don't recognize as yours. If you'd like to consolidate your efforts, credit monitoring from Experian lets you track your credit score, credit report and spending continuously, and you can set up alerts to let you know when changes and transactions occur.

What if you've already been hacked? If you believe you are a victim of identity theft, consider taking these three steps:

• File a report with the authorities. Documenting your experience with the FTC and filing a police report could be necessary to dispute unauthorized charges or accounts. They can also help you clear your record if criminal activity has taken place in your name.
• Freeze your credit. A credit freeze limits the access that others, including lenders, have to your credit file. Experian, TransUnion and Equifax maintain dedicated webpages where you can set up credit freezes and find instructions for requesting freezes by mail. Since credit freezes stop legitimate applications for credit as well, and must be put in place and removed by contacting each bureau individually, they may be a hassle.
• Add a fraud alert to your credit reports. A more convenient alternative to freezing your credit is to add a fraud alert if you are, or suspect you may be, a victim of fraud. These alerts on your credit report ask creditors to take steps to verify your identity before issuing any credit in your name. Requesting a fraud alert with any credit reporting bureau will trigger an automatic fraud alert with all three bureaus.