Arm Yourself With Knowledge: The Difference Between Identity Theft and Credit Fraud

12 October 2015

Although conducting more and more business online has opened the door to new types of digitally based identity theft, consumers have responded by becoming increasingly savvy about how to protect their personal data on the internet. One misconception that has managed to persist, however, is that identity theft and credit fraud are interchangeable, two ways to describe the same event. In fact, credit fraud is just one type of identity theft, which usually includes more damaging personal data breaches. While credit fraud is typically less serious than identity theft, they both occur far too often. Knowing the difference between the two, as well as the best ways to prevent each of them, can help keep consumers safe as they become responsible for a larger and more vulnerable pool of their confidential information.

Credit fraud

credit card fraud occurs when the specific details (card number, expiration date, security code, etc.) of a certain card are compromised. Using this information, a thief can use the card to make purchases until it either runs out of funds or hits its limit, before leaving it behind. Even without the card, a thief only needs the information from your card to make purchases online.

To help prevent credit card fraud, shred documents that list your financial information before throwing them away. These documents may include credit card statements, bills or pay stubs. Because our information is spread across so many documents and web sites in addition to the cards in our wallets, it is not always apparent when your financial information has been compromised. To help you stay informed, credit monitoring services can alert you when they detect certain activity in your credit report that could indicate fraud.

If your credit or debit card is stolen, it’s important to act quickly. Call your bank or card companies immediately, report any fraudulent purchases and ask that the cards be canceled and reissued.

Identity theft

While credit fraud is limited to a specific card or account for a relatively short amount of time, financial identity theft can last much longer and do far more damage. In a case of identity theft, a thief gets a hold of a victim’s personal information, then uses it to impersonate him or her. In addition to accessing credit and debit cards, identity thieves can open new accounts using their victims’ names and Social Insurance Numbers, maxing out credit cards and racking up debt for years before defaulting, leaving their victims accountable.

One way to monitor for identity theft is to regularly check your credit reports. Each year, you’re allowed to get one free credit report from each of the big bureaus. Many people get one report every six months so they can keep an eye on things throughout the year. If you’re particularly worried about identity theft, you can also pay to have security freezes placed on your account.

If you have had your identity stolen, in addition to calling your card companies and bank, report the fraud to the credit bureaus, Equifax and TransUnion. Then, you can place an alert on your credit account. This will force anyone requesting access to your account, whether to open a new line of credit, increase an existing credit limit or request a new card, to go through added security steps.