Celebrities Targeted in Credit Report Fraud: How to Stop it from Happening to You!

This week, a frightening story broke and quickly lit up financial media outlets (read the story here). It was reported that AnnualCreditReport.com had been used to illegally access credit reports belonging to some of the most famous people in the world. Michelle Obama, Hillary Clinton, Joe Biden and a slew of A-list celebrities were among the people whose credit reports may have been delivered to fraudsters. The worst part about this story is that it’s not terribly hard to perpetrate this kind of fraud.

Annualcreditreport.com is the one website where consumers can claim their free credit reports pursuant to federal law. When you visit the site, you enter your personal information—name, address, date of birth and Social Security Number. Then, you are asked challenge questions to which only you are supposed to know the answers. This challenge process is called “authentication.”

If you answer the questions successfully, the credit reporting agencies are under the impression that the legitimate consumer is sitting on the other end of the computer screen and they’ll deliver the credit report. If you answer the questions incorrectly then you’ve failed authentication and your credit reports will not be delivered.

There are normally four such challenge questions with four to five answers to choose from in a multiple choice format. But with the current authentication process, the chance of a fraudster beating the system isn’t that unlikely. In fact, according to Bankrate.com, for Experian and Equifax, there is a one in 625 chance that someone could randomly correctly answer the questions, and a one in 125 chance of doing so at TransUnion. A fraudster can improve on those odds by eliminating some of the more unrealistic multiple choice options.

The AnnualCreditReport.com fraud wasn’t a data breach. And, it was not perpetrated by sophisticated fraudsters and is being suggested by at least one of the credit reporting agencies. Anyone with a computer and an elementary understanding of how to find a consumer’s name, address, date of birth and Social Security Number can gain access to someone’s credit reports, with a little luck.

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You can only claim your credit reports once every twelve months via AnnualCreditReport.com so if you’ve claimed your free reports in the past twelve months a fraudster cannot get access to them via that site. It’s just another reason to claim your free credit reports. Unfortunately, only about four percent of free credit reports are claimed every year, which leaves most of us vulnerable to a similar fraud.

Certainly a fraudster could try to buy your credit reports from a variety of websites and would have to answer the same type of multiple choice authentication questions. However, they’d have to pay for your credit reports and that means using a credit card, which makes them more likely to get caught. Plus, there are way too many people who haven’t claimed their free reports so the fraudsters always have an ample “target” list.

Monitoring your credit reports is also good way of keeping track of when your credit report is accessed. You can pay a monthly fee to monitor your credit reports or you can monitor them for free, with Credit Sesame’s free Experian credit monitoring service.

Finally, you can freeze your credit reports. Freezing is the process whereby you direct the credit reporting agencies to take your credit reports out of circulation. No company can access your credit reports while they are frozen, unless you have an existing relationship with them or it’s a collector that is attempting to collect a debt.

No person, including you, can access your own credit reports under any circumstances unless you “thaw” your reports. When you thaw your reports you are putting them back into circulation and any company can access them. Freezing is free if you’ve been a victim of fraud and there’s a nominal fee to freeze if you have not.

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