A Guide to Recovering From Identity Theft and Credit Card Fraud

Name: A Guide to Recovering From Identity Theft and Credit Card Fraud
Item: A Guide to Recovering From Identity Theft and Credit Card Fraud
Author: Doug Milnes, CFA

Have you experienced credit card fraud or identity theft? You're not alone. MoneyGeek shares steps to recover your information and safeguard against these unfortunate but common scenarios.

By Doug Milnes, CFA

Edited by Erika Hearthway

Updated: November 5, 2024

Advertising & Editorial Disclosure

As consumers rely more and more on their credit cards and the internet to make purchases, they are becoming increasingly susceptible to credit card fraud and identity theft. In 2020 alone, the FTC received 4.8 million identity theft and fraud reports.

If you experience fraud or theft, your credit score could suffer, you may lose money and the thief could file a fraudulent tax return — among many other negative implications. However, by taking the right steps, you can prevent fraud from happening and identify it immediately if someone tries to steal your information. You can also mitigate the impact on your finances, credit cards and credit score if identity theft does occur.

Consumers lost $56 billion to identity theft in 2020.

The average identity theft victim loses $1,100.

The most common forms of identity theft include financial, criminal, medical, synthetic and child identity theft, along with identity cloning and concealment.

Sources:

Javelin, Complete ID

How to Check for Identity Theft

It’s crucial that consumers know what preventative measures they can take to keep track of their accounts and the actions they need to take once they learn their identity has been compromised. After all, even if you do everything right, a thief could outsmart the system and steal your information. But the sooner you act and catch the fraud, the less potential damage there could be to your identity and credit.

Taking Preventive Actions

By staying on top of your credit reports, monitoring them for fraud , properly storing your documents and taking other preventative steps, you can avoid becoming a victim of credit card fraud and identity theft. Here is some more information on the steps you can take to shield yourself.

Look over your credit report

You can order your free credit report and see if any fraudulent charges were made on it. Go to AnnualCreditReport.com to get your report from the three credit reporting agencies, Experian, Equifax and TransUnion.

Review your financial and medical statements

Read your bank and credit card statements to ensure there are no fraudulent charges, and review your statement of benefits from your doctor’s office to search for medical fraud.

Properly store your documents

Never leave your private documents, like your bills or papers with your Social Security number on them, in public view or discard them into the trash without shredding them first.

Update your software

Companies put out software updates to prevent hackers from stealing your information. Always update your devices when prompted.

Create strong passwords

If you use a weak password or use the same one over and over again, it will be much easier for someone to steal your information. Always create unique, strong passwords for your logins instead.

PROTECT YOUR DATA

When you access public networks, identity thieves can steal your data and either trade it on the black market, use it to access your accounts, or open new accounts under your name. Protect your data by using identity protection services so you can browse the internet at ease.

Steps to Take When You Detect Warning Signs

Sometimes, even when you take all the right steps, identity theft and credit card fraud still happen. But if you know how to spot the warning signs, such as fraudulent charges on your card or getting denied for a credit card, you can act swiftly and prevent further damage. When you think something is awry, here’s what to do.

Report identity theft. Contact the Federal Trade Commission online at IdentityTheft.gov or call 1-877-438-4338. The FTC will ask you for details about what happened.
Contact your credit card and banking providers. Let them know about fraudulent charges so they can file a report and hopefully reverse the charges ASAP.
Put a fraud alert on your credit reports. Get in touch with one of the three bureaus — either TransUnion, Experian or Equifax — to place a fraud alert on your account. Then, creditors will make sure that when someone applies for a new card, it’s actually you.
Invest in a credit monitoring service. This service will scan your credit report for suspicious activity and alert you if a new account is opened.

An illustrated image of a man reporting identity theft.

Steps to Recoup from Identity Theft and Credit Card Fraud

It is entirely possible to recover from credit card fraud and identity theft, especially if you catch it immediately. But you have to address it quickly and get in touch with the right providers to take corrective measures. Here’s how to handle identity theft and credit card fraud if you are a victim.

1. Note the damages

First, you’ll have to figure out what kind of credit card fraud and identity theft occurred and the extent of the damages. Look at your credit card and bank statements as well as any other relevant documents (such as medical bills or your tax returns). Also, run a credit report to look at the big picture and see if there has been suspicious activity with any of your credit cards, if your score keeps going down, or if a new account has been opened in your name.

2. Call your bank or credit agencies

Contact your service provider as soon as you see a fraudulent charge on a bank or credit card statement. For instance, if you have a debit card with Bank of America, and someone used it to pay for goods, then call the bank right away. If you have a credit card, then contact your credit card provider ASAP. You should also alert one of the three major credit bureaus — Experian, TransUnion or Equifax — if the fraud occurred on a credit card.

3. Place fraud alerts

A fraud alert is a red flag to a lender or credit card provider that you are a victim of identity theft or credit card fraud. They are free, and you can place one with one of the major credit bureaus to stop fraud from happening again. If someone applies for a credit card or loan, the lender or provider will contact you before automatically approving an application. It will stay on your profile for at least a year, but if you fill out a Federal Trade Commission Identity Theft Report or a police report, you could place an extended seven-year fraud alert on your file.

4. Freeze your credit

By placing a freeze on your credit, creditors won’t be able to access your credit report prior to opening a new account. They will likely not approve applications that are fraudulent. You can put a freeze on your file or lift it for free for you or your children who are 16 or younger. All you have to do is contact the three credit reporting bureaus to do this. Check out the Experian Freeze Center, Equifax Credit Report Services and TransUnion Credit Freezes websites for more information.

5. Contact any businesses involved

If any businesses were involved, such as your internet provider or gas company, then let them know about the credit card fraud and identity theft. Ask them to alert you about any new charges and reverse certain charges if you didn’t make them.

6. Dispute activity on your credit report

If you see that there has been identity theft on your credit report, then contact one of the major credit reporting bureaus, submit an identity theft report to the FTC and file a police report with your local law enforcement agency. It’s essential to take these steps so you can get an extended fraud alert placed on your report and prevent a thief from opening new credit cards and loans. If you don’t take this step, you will still be vulnerable to theft, and your credit score could drop. This means that it’ll be harder for you to access loans and credit in the future.

7. File case with IdentityTheft.gov

Once you file an identity theft report with the FTC on its website, you will receive your report as well as a recovery plan. All you need to do is go to IdentityTheft.gov and provide the agency with all the critical details. It will walk you through every recovery step, update your plan as needed and track your progress.

8. Report it to the police

By reporting identity theft to the police, you can get an extended fraud alert placed on your file for seven years. Plus, you can alert the police if someone has been breaking the law in your area. For instance, perhaps you caught a neighbor stealing your mail on tape or someone in your building stealing your garbage. The police could follow up and put a stop to the crimes.

9. Change your passwords

A thief may have stolen your information because they guessed your password. It’s important to go through all your logins and make sure each password is unique and hard to guess. (Hint: Don’t use your name, date of birth or other obvious information in your password.) You can use a Strong Password Generator tool to come up with a strong password and protect your information.

10. Replace any stolen documentation

If your Social Security card, license, passport, credit card or any other documentation got stolen, then you need to replace it by contacting the right agency. For instance, you could get in touch with the DMV, let them know what happened and get a replacement license made as soon as possible. Your credit card provider should be able to cancel your credit card and expedite a new one to you as well.

An illustrated image of a many learning about information security.

Staying Safe in the Future

Whether or not you’ve been a victim of identity fraud or credit card theft, you can take certain steps to stop it from happening in the future. Taking these steps helps ensure that your information is as protected as possible.

Ways to Continue Protecting Yourself

It’s important to get in contact with the correct parties and take the right steps to continue protecting yourself from identity fraud and credit card theft. Banks and credit card providers may be available 24/7, so you could potentially take some of these steps right away.

Continue to monitor your credit report

Check your credit report frequently for any changes or fraudulent activity. You can do this for free or pay to upgrade for even more services. For instance, Experian offers an identity theft protection service free for 30 days and then $19.99 a month after that. The company will monitor for identity theft, perform dark web surveillance and give you coverage for up to $1 million in identity theft insurance.

Likewise, LifeLock by Norton can monitor your credit score with all three credit reporting agencies monthly. While it is on the expensive side, it monitors just about anything.

Don’t click on suspicious emails or links

If you receive emails or text messages from people you don’t know, do not open any emails, links or attachments. These could be phishing scams used to collect your sensitive information.

Don’t give out your information to people over the phone

A scam artist may call you and tell you they’re with the IRS or your credit card company to scare you and get your information. If this happens, ask for their credentials, and then hang up and call your providers instead to see if the call was legitimate or not.

Password protect your devices

Put passwords on your devices, including your laptop, phone and electronic watch, so that if people find them, they won’t know how to access them and all your information.

Understanding Other Types of Fraud

There are other types of fraud that could occur aside from credit card fraud and identity theft. Being aware of them will help keep you protected now and in the future. Here are all of the types of fraud to take note of.

Type of Fraud	Description
Identity Theft	Identity theft happens when someone steals your sensitive information in order to commit fraud. It is a general term and could apply when someone takes your credit card information to make purchases or steals your information to receive free medical services.
Credit Card Fraud	Credit card fraud happens when someone steals your credit information to make purchases, apply for cards and do anything else that would affect your credit report.
Tax Fraud	Tax fraud has to do with the IRS. For example, a theft may steal your Social Security number to file a fraudulent tax return and get money from the IRS.
Medical Theft	Medical theft occurs when someone steals your information to submit fraudulent claims to your insurance provider or Medicare/Medicaid.
Criminal Theft	Criminal identity theft applies when someone uses your information when they are committing a crime to avoid it having to go on their criminal record.

Protecting Your Child from Identity Theft

Children are also vulnerable to identity theft, but as a parent or caregiver, you can take preventive steps to stop it from happening.

Freeze your child’s credit reports

You can freeze your child’s credit reports to avoid thieves from taking out loans and lines of credit in your child’s name. Get in touch with one of the three major credit reporting bureaus to do this if your child is younger than 16.

Shred your child’s documents

Before putting documents with your child’s sensitive information into the trash, shred them just in case someone is going through your garbage.

Monitor your child’s phone and emails

Tell your children never to give out their personal information via phone or email or to click links without knowing who sent them. Make sure you have your child’s passwords to their devices and accounts so you can monitor them as well.

Use your personal information

Let’s say a retailer wants to know your child’s phone number to text them a coupon on their birthday. Tell the retailer — or other company — your information instead so you can discover fraud if it happens.

Ask the experts:

What steps should you take to protect yourself from credit card fraud and identity theft before and after it happens?

Senior Vice President of Fraud and Security Intelligence at SAS

Treat all online interactions with a healthy degree of skepticism. Step back and ask yourself, should I really respond to that email or click that link? Is this truly a legitimate website?

If you detect fraudulent activity, immediately contact the bank or credit card company’s fraud department. They will instruct you on how to move forward. This typically requires you to contact each credit reporting agency (CRA), as they work independently. You may also need to call your local law enforcement to file a police report. Be sure to record the case numbers and other pertinent details provided by the financial institution and law enforcement, as you will need them to dispute the fraud to the CRAs.

Once the investigation is complete, the bank or credit union should report all fraudulent activity to the CRA to have it removed. This can take months or, in some cases, may not take place at all. It is critical to be your own advocate in seeing the investigation through and ensuring all fraudulent activity is removed from your credit report with each of the three credit bureaus.

Pro Tip: The Identity Theft Resource Center is a tremendous resource for individuals who fall victim to identity crimes. The ITRC’s call center is staffed with live advisors during regular business hours who can help put victims on the path to reclaiming their identities.

The unfortunate truth is that, once you’ve fallen victim, it’s even more important to protect yourself moving forward. Having this happen once proves your personal information is widely available online, so the chances of it happening again are higher.

Associate Professor of Computer Science and Challey Scholar at North Dakota State University

Identity theft and credit card fraud are serious threats that can significantly affect individuals and organizations. Identity theft occurs when someone uses your personal information, such as your name, social security number, or credit card information, without permission to commit fraud or other crimes.

Credit card fraud occurs when someone uses your credit card information without permission to make unauthorized purchases or access your credit. It is important to take the following steps before and after it happens to protect yourself from this type of fraud:

Before:

Use strong passwords for all online accounts and change them regularly.
Monitor your credit card and bank statements regularly for any suspicious activity.
Monitor your credit card and bank statements regularly for suspicious activity, and use strong passwords and two-factor authentication whenever possible.
Avoid clicking on links or opening attachments in emails from unknown sources, and be aware of phishing scams, which use emails or text messages to get you to provide personal information.
Be aware of your surroundings when using your credit card, and ensure that someone doesn’t scan it without your knowledge.
Never give out your credit card information online or over the phone unless you are confident about the other party’s authenticity. In addition, you may sign up for fraud protection services that your credit card company or bank offers.
Keep personal documents secure and shred any unnecessary documents with personal information before throwing them away as an added measure of protection.

After:

Contact your card issuer and inform them that you are a victim of credit card fraud or identity theft and request to block the card and have a new one issued.
You should also contact one of the three major credit bureaus (Experian, TransUnion or Equifax) to place a fraud alert on your credit report.
You should file a police report with your local law enforcement agency and contact the Federal - Trade Commission (FTC) to report the incident.
Change your passwords and PINs for any accounts that may have been compromised.

It is critical to be vigilant, and by following these steps, you can better protect your personal and financial information and reduce your risk of falling victim to this type of fraud.

Professor of Mathematics at Trine University in Angola, Indiana

The warning sign that you are a victim of a credit card scam is unusual activity on your credit card statement. Many times, the thief will initially make very small transactions. These transactions can be small charges, or sometimes they may even be small credit. Small transactions are made to confirm that the credit card is legitimate. Since too many people do not verify the transactions on their credit card statements, these charges often go unnoticed by the credit cardholder.

Once the thief has made several transactions that have not been disputed, they have a choice: continue to milk the card for the long term or max out the card. To milk the card for the long term, they continue to make small individual transactions or set up recurring transactions to generate a monthly income from that card. The opposite approach is to make very large transactions to max out the card.

From the criminal’s perspective, this approach has quick gains with a significant disadvantage: the owner of the card will almost always notice the charges. In this case, the charges will be put in dispute, and the card will be canceled.

The above scenario is for a traditional credit card. With a credit card, the credit card issuer acts as a middleman. The merchant sends the purchase transaction to the issuer, the issuer pays the merchant for the purchase, and the issuer bills the cardholder for the transactions. In exchange, the issuer takes a percentage of the transaction amount as payment.

With a credit card, when the cardholder puts a transaction in dispute, the issuer does not pay the merchant nor require payment from the cardholder until the dispute is resolved. If the transaction is determined to be fraudulent, the issuer will not pay the merchant. If the merchant had already been paid before the transaction was disputed, the issuer is responsible for reversing the transaction or eating the costs.

Debit cards are different. While a debit card may have a Visa or MasterCard logo on it, it is not a traditional credit card. Debit cards are tied to the cardholder’s bank account. Instead of the issuer floating the loan, the transactions are immediately withdrawn from the cardholder’s bank account. If a transaction is put in dispute, the cardholder is already without the money. While the issuer may be able to resolve the dispute and return the amount of the transaction to the cardholder’s bank account, many times, the cardholder is without the amount of the disputed transaction during the dispute investigation and may never have the money returned if the fraudulent merchant account is closed before the issuer can reverse the transaction.

According to the federal Fair Credit Billing Act, the cardholder is responsible for up to $50 in fraudulent charges with traditional credit cards. Debit cards have different liability limits. According to the Electronic Funds Transfer Act, debit card holders have a $50 liability if the fraudulent transaction is reported within two days, a $500 liability if the fraudulent transaction is reported within 60 days, and no protection if the fraudulent transaction is reported after 60 days.

A whole other area of credit card fraud would fall under the area of identity theft. If a thief has found or stolen enough personal information, they can apply for a credit card in your name. The victim may find out about this type of credit card fraud when they apply for a loan or are contacted by collection agencies. The fraudulent transactions made on these cards can destroy the victim’s credit score, but the victim is not responsible for the fraudulent charges.

While DataProt claims it only costs a consumer $290 and 15 hours to resolve the average account takeover, it may take months or years for victims to clear the impact of the fraud from their credit scores.

Some legitimate fraud prevention services are Experian, LifeLock, Identity Guard and Identity Defense. These services monitor your credit score on the three credit agencies (TransUnion, Equifax and Experian) and monitor the dark web for your personal and credit information. However, there is a charge for these services. To protect yourself, Experian suggests keeping your physical cards safe, not clicking on links in phishing emails and text messages, using an encrypted virtual private network (VPN) when using public Wi-Fi networks, regularly checking your online accounts for fraudulent transactions and monitoring your credit. You can request a free copy of your credit report every year at AnnualCreditReport.com.

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Resources for Recovering From Identity Theft & Credit Card Fraud

With these resources, you can learn more about protecting yourself from identity theft and credit card fraud and what to do should it occur. Then, you can be fully equipped to handle any situation where your personal information could be or has been compromised.

Experian: This is one of the three credit reporting bureaus where you can check your credit report, monitor your score, and sign up for identity theft services.
Equifax: This is another one of the three credit reporting bureaus where you can gain access to your report and look over it for any fraudulent purchases or suspicious activity.
TransUnion: This is the final credit reporting bureau you can use to track your credit report, set up fraud alerts, freeze your credit, and more.
Federal Trade Commission: On the FTC website, you can file an Identity Theft Report and learn more about how to report fraud and get your free credit report. It’s a one-stop-shop free resource for consumers.
LifeLock: With LifeLock by Norton, you can sign up for identity theft protection and be rest assured that your identity will be as protected as possible from thieves.

About Doug Milnes, CFA

Doug Milnes is a CFA charter holder with over 10 years of experience in corporate finance and the Head of Credit Cards at MoneyGeek. Formerly, he performed valuations for Duff and Phelps and financial planning and analysis for various companies. His analysis has been cited by U.S. News and World Report, The Hill, the Los Angeles Times, The New York Times and many other outlets.

Milnes holds a master’s degree in data science from Northwestern University. He geeks out on helping people feel on top of their credit card use, from managing debt to optimizing rewards.

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sources

Insurance Information Institute. "Facts + Statistics: Identity theft and cybercrime." Accessed November 5, 2024.
Complete ID. "Education Center." Accessed November 5, 2024.

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