What Is Credit Fraud?
Key takeaways
- Credit fraud is illegally using someone’s credit account to buy items or withdraw money.
- Credit fraud can happen through identity theft, card skimming, phishing scams and data breaches.
- If you think you’re the victim of credit fraud, report it to your card issuer immediately and consider freezing your accounts.
Credit fraud is when a thief accesses your credit card to buy things or otherwise take money. They might use your personal info to get into the account, or use a device to skim your card’s code, or even break into the card issuer’s data.
There are steps you can take to protect yourself from credit card fraud, as well as steps to take if credit fraud happens to you.
What is credit card fraud?
Credit fraud — or specifically credit card fraud — usually involves someone stealing your credit or debit card details and making purchases with your account.
But there’s also application fraud, where a criminal uses your personal information to open a new account in your name, making charges that you would be held responsible for.
Types of credit card fraud
Credit card fraud can come in many different forms, but here are the most common.
Identity theft
Identity theft involves someone stealing your personal or financial information to access your accounts. You might not even realize the fraud has happened until you get an unexpected bill or debt collection call for purchases you didn’t make.
Identity theft is on the rise in most states according to a LendingTree study, so it’s important to be on the lookout for this type of credit fraud.
Credit card skimming
Credit card skimming is when someone secretly records your credit card information when you use it at an ATM or point-of-sale (POS) system like a gas station pump.
This can be done via attaching a small device to the card reader by a criminal or even by the business’ employees themselves. The thief can then use your account or sell access to it.
Nearly 30% of Americans have fallen victim to credit card skimming at some point in their lives, with millennials and Gen Zers the most likely targets.
Phishing
“Phishing” means tricking someone into doing something — such as giving up account information and passwords — by pretending to be legitimate.
You might get an unsolicited email or text message from what seems to be an internet or phone service company, mortgage lender, bank or even the IRS, but it’s really a scammer hoping to get your information. They can then use your details to open new accounts or tap into your existing ones.
Data breaches
Data breaches involve criminals breaking into business or government databases and stealing personal information, financial account details or passwords.
The information can be sold or used, causing you financial harm. Breaches can occur at organizations of all sizes, including your health care provider or employer.
How to watch out for credit fraud
Prevention can help you stop credit fraud before it happens. Monitoring your accounts and keeping a sharp eye out for scams can go a long way.
Frequently check your credit reports
Check your credit reports regularly for misinformation or any suspicious activity.
You can do it yourself, by requesting free credit reports — up to once a week — from each of the three major credit reporting agencies via AnnualCreditReport.com. Or for a price, you could use a credit-monitoring service, which will alert you anytime information on your report changes.
Look out for credit card skimmers
To protect your money, learn how to spot a credit card skimmer. Check all POS terminals before use. For example, don’t use any payment terminals if any part is loose or shows signs of tampering, such as scratches or cracks. Avoid ATMs in poorly lit areas, since criminals are more likely to tamper with these.
Be careful with your digital safety
To ensure your digital safety, use strong passwords and multi-factor authentication. Don’t use the same password on multiple accounts. Also be sure to keep your Wi-Fi network private and secure, and to use security software on all your smart devices.
Set up account alerts
Even if you don’t use a credit-monitoring service, you can still set up account alerts to stay on top of suspicious activity with your credit or bank accounts. You can have your account text or email you (or notify you via their app) about any new charges or transactions over a certain limit.
Consider freezing your credit
If you’re worried you might be vulnerable to credit fraud, you can also freeze your credit, stopping any new accounts from being opened in your name, and blocking access to your credit report. You can place a credit freeze by contacting any one of the major credit reporting agencies, and you can temporarily or permanently lift it when you want to apply for new credit.
What to do if you’re a victim of credit fraud
- Notify your card issuer and other institutions: If you suspect you’ve become a victim of credit fraud, notify your financial institutions right away. This includes banks, lenders and credit card issuers. You may be able to do this online, through the institution’s mobile app, or by calling customer service.
- Lock your accounts: Many credit card issuers let you lock your account when you aren’t using it. This prevents new charges from going through. You can do this when you suspect fraud, or anytime you know you won’t be using your credit card.
- Freeze your credit and initiate a fraud alert: A credit freeze and fraud alert will make it harder for thieves to open new accounts in your name. You can do both of these by contacting any one of the three major credit agencies — Equifax, Experian or TransUnion — they will notify the other two. The fraud alert will stay on your account for one year, but you can extend it if you want.
- Check your credit reports for errors: If you notice credit fraud or even just mistakes on any of your accounts, check all the other accounts for errors or fraudulent activity. You can then dispute errors with the credit reporting bureau, and almost all disputes result in a successful resolution.
- Contact the authorities: Also be sure to report any instances of confirmed fraud to the authorities. Local law enforcement can sometimes help, but if the fraud involves identity theft, be sure to also check with the Federal Trade Commission’s identity theft center. And if the theft happened online, you can let the FBI’s Internet Crime Complaint Center know.