Protecting Your Credit- The FACT Act in Layman's Terms

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Protecting Your Credit- The FACT Act in Layman's Terms

Do you know all the implications of identity theft? Do you know that an imposter can open lines of credit, drain your bank account, file for bankruptcy, get an ID card, get a job, and even be arrested all in your name? All the missed payments an imposter doesn’t make are reported in your credit file causing your credit score to suffer.

And according to Liz Pulliam Weston, author of Your Credit Score and MSN Money personal finance columnist, a poor credit history affects your whole financial life. It’s not only creditors who have access to your report, but also insurance agencies and potential employers.

So if you are victimized by identity theft, not only may you not be able to open new accounts and qualify for low interest rate loans, but you may pay more for insurance, and you just might not be able to get a job. Top it all off with a warrant for your arrest when the imposter fails to show up for their court date and you have a scenario that doesn’t sound like any fun at all!

Your credit report and score are among the most valuable life tools you have. With an error free report you can live in freedom from the terror of identity theft; and with a high credit score you have a powerful foot in the door for negotiating low rate loans, lower insurance rates, and job opportunities. With so much at stake, it seems only natural that you, the consumer, should have an open door for maintaining these financial tools at the highest level of accuracy. It seems so simple, and the fact of the matter is that with the Fair and Accurate Credit Transactions Act (FACTA) of 2003, it’s getting simpler.

Free Annual Credit Report

manchalkboardOne of the most significant provisions of FACTA, according to Weston, is the right to a yearly free credit report. Experts have recommended for years that consumers get their credit report annually to check for errors because through your credit report you will get the first indications of identity theft. But until recently, the three largest credit reporting agencies have charged a fee for a report.

Now that it’s available for free, consider setting a yearly date—perhaps tax day, the first day of winter, or even your birthday—to easily and cheaply follow the experts’ advice and in the process prevent the headache of recovering from identity theft. Some experts also suggest that you get one of your three free reports every four months (each credit reporting agency issues a unique report). This strategy allows you to stagger your reports throughout the year and is a further safeguard against id theft.

You Have the Right

    • To be told if information in your file is used against you.

    • To know what is in your

    • To ask for a credit score

    • To give or not to give your consent for your report to be shared with employers

    • To dispute incomplete or inaccurate information

    • To limit prescreened offers of credit and insurance you receive

    • To seek damages from violators

    • To have credit reporting agencies correct or delete inaccurate, incomplete, or unverifiable information

    • To not have outdated negative information reported

  • To limit access to your file to those with a valid need only

The easiest way to obtain your free credit report is to go to the web site It is sponsored by the three big credit reporting agencies—Equifax, Experian, and TransUnion. It is important that you do not go to the individual reporting agencies sites because from there you have to sign up for a free 30 day trial to get your free report; but if you don’t opt out of the service before the 30 days is over they will automatically begin charging you the monthly fee.

Through, you can request a report online, download the request form and mail it in, or simply make a phone call and go through a simple verification process. Expect to answer some questions only you should know about information in your credit file as part of the verification process online and over the phone. Keep in mind that according to the FTC web site, will not request personal information through e-mails, phone calls or pop-up ads, so if you receive any of these stay on the alert for fraud.

You are entitled to reports from other companies that develop reports as well. To review your medical records or payments Weston recommends getting a free report from The Medical Information Bureau. If you want to review your residential, employment, or insurance claims history then you can request a free report from ChoiceTrust.

Preventing Fraud through Alerts

newsstoryinfoFACTA has also provided ways for quickly stopping fraudulent activity. In the past, a stolen identity meant making numerous phone calls to all your credit card companies as well as to the three major credit reporting agencies. Now all it takes is one phone call to one credit reporting agency to place a fraud alert. The one agency you contact will then contact the other two. You will have to provide proof of your identity, and if you want it to remain on your account for longer than 90 days you must make a request. Making such a request will extend the alert up to 7 years.

A new type of alert for active duty military has also been created. Military members can place a notice on their credit file for 12 months to alert creditors of the potential for fraud. If you are military and will be out of the country longer than 12 months, then you can request another alert after the first one expires. This is a great help for military members who are working outside of the country and may not have the means necessary to keep tabs on their accounts making them particularly vulnerable to fraud.

consumerreviewspicWhen you place the initial alert, you are also entitled to a free copy of your credit report. If you choose to extend the alert to 7 years you can get two more free copies of your credit report within the 12 months after placing the alert in your file.

Some Identity Theft Stats to Consider

    • 3.23 million consumers discovered new accounts opened by an identity thief

    • 300 million hours spent by victims in correcting the problem

    • 6.6 million consumers discovered misuse of an existing account

    • $48 billion in losses to businesses

  • $5 billion in losses to individuals

Source: A FTC prepared statement (June 2004) on Identity Theft and Social Security Numbers

With all types of alerts, when a creditor receives a request to open a new account in your name they will be required to make a reasonable effort to contact you to verify your desire to open the account. According to Weston, while it forces creditors to take some action (in the past they would typically ignore alerts), it still falls short of consumer advocates’ desire to require creditors to contact you by telephone.

Weston says FACTA also falls short in giving consumers the option to freeze their credit report—something currently available only to residents of 12 states. With this freezing option, the consumer is normally given a PIN with which they can unlock their credit report when they know they are going to apply for credit. It reduces the chances for identity theft, cuts down on instant credit offers, and keeps customers from spontaneously applying for credit cards they may not need.

Editor's Note: This article is the first in a two-part series regarding the rights of consumers under the Fair and Accurate Credit Transactions Act (FACT Act). Click here to read the second article.

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