This scam will ruin your life

by John Fitzsimons on 04 April 2010  |  27 comments
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With this scary type of fraud on the rise, John Fitzsimons looks at how the scam works, and how to protect yourself.

How would you feel if someone tried to steal your life?

According to new research by credit firm Experian, identity fraud is now more widespread than ever. The number of fraud victims seeking help from the firm jumped 20% during 2009, with 5,353 new victims searching for help in retrieving their identities.

Having your identity stolen is not exactly a barrel of laughs either – the average financial loss per victim came to £1,100 last year, with one particularly unlucky person finding themselves almost £59,000 out of pocket, according to the firm.

It’s not just Experian that have seen this sharp rise in identity theft. CIFAS, the UK’s fraud prevention service, also reported a rise of 32% in ID fraud in 2009.

An unpleasant secret

It's not just the number of us falling prey to this fraud that is on the increase either.

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Somewhat worryingly, the time it takes for people to discover they are victims of this fraud has jumped by more than a fortnight to 17 days, taking it to a frankly staggering 416 days on average.

That’s more than a year of you being completely unaware of what is going on. Just think of the damage that can be done to your finances over a year. And how long it will take you to then sort things out again.

• Read this blog: Insolvency may be the best option

How ID fraud works

According to CIFAS, over the past year the fraudsters have focused on targeting one of three things: bank accounts, communications (generally things like mobile phone contracts) and mail order products.

The vast majority of these frauds take place online – just shy of three quarters of identity frauds happen on the internet. However, a growing issue is also postal address fraud, where the fraudster applies for a mobile phone contract or a bank account in your name, using your current postal address on the application.

The reason this is on the rise is, quite simply, it has a better chance of working – when the bank or phone provider or whoever checks your application, everything will look above board. Around 63% of frauds committed on loan accounts last year took place in this fashion.

Now, you’re probably asking yourself how these incidents of fraud actually take place. You’d notice if you got a letter confirming a new contract with Vodafone or Orange that you hadn’t actually asked for, wouldn’t you? The trouble is that CIFAS reckons this type of fraud is only really committed by organised criminals, who have a sufficiently sophisticated approach to be able to intercept your post – this can be something simple like getting to it before you do from a communal post area, to having contacts within the post sorting office, or even among the postmen themselves.

• Watch this video: The scams that make you shiver 

Who they are targeting  

According to CIFAS, there is still a ‘typical’ identity theft victim – a man in his forties – though both CIFAS and Experian emphasise this is shifting as the fraudsters begin to target all of us.

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Experian warned that because the fraudsters typically targeted the wealthy, those of us on more modest salaries are not being vigilant enough in protecting ourselves. Identity theft happens to other people, right?

What’s more, as fraudsters are likely to change the profile of their victims (their age for example), younger people are more likely to be targeted than ever before. Indeed a third of all victims are aged 18-34.

In truth, so long as we give the fraudsters an opportunity to get at us, we are all likely to be victims.

How to protect yourself

So after all that, just how can you protect yourself? Here are my top tops on keeping your identity safe.

Protect your post

If you live somewhere where you rely on a communal post area (university halls or an apartment block for example) then it’s very important that you make your post as secure as possible. If you have the option of moving to an individual, protected slot for your post then you should definitely take it!

Either secure or shred your documents

I’ve written before about what a shredding demon my wife is. The envelope has barely been opened before the shredder is plugged in and she’s ready to destroy it. I joke about it, but it is important to shred all documents containing information that could be used by fraudsters before recycling them if you aren’t going to keep them for your own records.

Check your bank statements regularly online

Every time you read an article on lovemoney.com, you can hop over to online banking and, in a quick glance, check that everything is in order as regards all your bank accounts and credit cards. This is because our online banking service amalgamates information from all your different providers, allowing you to see all your different statements at a single glance, with a single log-in. (You can also categorise all your transactions, so you'll know immediately if some of your spending seems out of place.)

Be smart with your credit cards

You should only ever carry around the credit cards you might need at any one time – otherwise you’re asking for trouble. It also pays to keep an eye on your card when paying for goods.

And finally, make sure you are in tune with your billing cycle – if your bill doesn’t arrive on time, get in contact with the provider immediately as there’s a danger fraudsters have changed your billing address, and gone on a spending spree!

Monitor your credit report

If fraudsters are trying to sign up for all sorts, you can cut them off pretty early if you monitor your credit report regularly. I’m a member of Credit Expert (part of Experian) , and have been for about three years or so now, and love the fact that whenever anything happens to my report – someone searches it, a new record is added – I get notified so I can go and check it and make sure it’s all correct.

You can get a free trial from Experian through lovemoney.com, though you will be charged a monthly fee if you don’t cancel at the end of the trial period.

Avoid ID theft protection

You might think ID theft protection is worth getting, but here at lovemoney.com, we think it's a waste of money. Read Avoid this expensive rip-off to find out why.

Of course, you may have your own tactics for keeping the thieves at bay. Why not share them via the comment box below? And if you fear you may have been caught out already, be sure to ask a question in our Q&A section and see if your fellow lovemoney.com readers can help.

More: Get £339 for using your credit card | Get richer than your boss!

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