How Can Consumers Prevent Identity Theft in Credit Applications?

Preventing identity theft during credit applications requires a combination of proactive measures to safeguard personal information, ensure secure communication, and monitor for fraudulent activity. With identity theft becoming increasingly common, especially during the credit application process, consumers must take steps to protect their data from being misused by fraudsters.

Steps to Prevent Identity Theft in Credit Applications

Check Your Credit Reports Regularly

Regularly reviewing your credit reports from all three major credit bureaus (Experian, Equifax, and TransUnion) helps you detect any suspicious activity or accounts opened in your name. Consumers can request one free credit report annually from each bureau at AnnualCreditReport.com. Spotting unauthorized credit applications early can prevent further damage.

Use Strong, Unique Passwords

For online credit applications, always use strong and unique passwords for your accounts. Avoid using easily guessable information such as names, birthdays, or common words. Use a password manager to store and generate secure passwords. Enabling two-factor authentication (2FA) on accounts also adds an extra layer of security.

Shred Personal Documents

Shredding paper documents containing sensitive personal information, such as old credit card statements, bank account numbers, or tax documents, can help prevent identity thieves from gaining access to your personal data. Avoid leaving such documents in easily accessible places, even at home.

Be Cautious When Sharing Personal Information

Only share personal information (like your Social Security number, bank account number, or address) with trusted entities. Always verify the legitimacy of the company or individual requesting the information. Avoid sharing sensitive data over the phone or through email unless you initiated the contact and are certain it is secure.

Apply for Credit Only with Trusted Lenders

When applying for credit, always use trusted and reputable lenders or credit institutions. Ensure the website is secure (look for https in the URL and a padlock symbol) before entering sensitive information. Be cautious of phishing scams where fake websites or emails impersonate legitimate companies to steal your data.

Consider a Credit Freeze or Fraud Alert

If you’re concerned about identity theft, placing a credit freeze or fraud alert on your credit file can help prevent new credit accounts from being opened in your name. A credit freeze restricts access to your credit report, which makes it harder for identity thieves to open accounts in your name. A fraud alert notifies potential creditors to verify your identity before extending credit.

Monitor Your Credit and Bank Statements

Regularly monitoring your credit card and bank statements allows you to spot unauthorized charges. Set up fraud alerts or account notifications with your bank or credit card issuer to receive immediate alerts of any unusual transactions. Many financial institutions also offer credit monitoring services that can alert you to changes in your credit report.

Limit Public Access to Personal Information

Be mindful of the amount of personal information you share online, especially on social media. Identity thieves often use public profiles to gather personal details, which can be used to answer security questions or complete credit applications. Set privacy settings on social media accounts and limit the information you share publicly.

Be Cautious of Phishing and Scam Calls

Fraudsters may try to phish for your personal information via phone calls, emails, or text messages. They might pose as legitimate companies offering credit or loans, asking for sensitive details like your Social Security number or bank account information. Always verify the identity of the caller or sender and never share sensitive information unless you are certain of the legitimacy of the request.

Report Suspicious Activity Immediately

If you suspect identity theft or notice any signs of fraudulent activity during a credit application, report it immediately to the lender and the relevant authorities. Contact the Federal Trade Commission (FTC) at IdentityTheft.gov, your bank, and credit bureaus to alert them to any fraudulent activity.

Example

Suppose you apply for a new credit card online. After submitting your application, you notice a charge on your bank account that you didn’t authorize. Upon checking your credit report, you discover a loan you never applied for. In this case, you should immediately:

• Place a credit freeze with the credit bureaus to stop further applications.
• Contact the lender and report the fraud to have the account closed.
• File a report with the FTC and your local authorities.
• Monitor your accounts for any additional signs of fraud.