Reacting to possible credit fraud Ask Dr. Don by Don Taylor, Ph.D., CFA, CFP • Bankrate.com

Dear Dr. Don,
I received a notice from a collections agency stating that they purchased debt from a telephone company and I owed $317. This balance was from 2001 and for service at an address where I never resided. The day I received the letter I spoke with a manager and let him know that this was fraud. I filed a police report and issued a fraud alert with the three credit agencies as well as the Federal Trade Commission.

Dear Brad,
I'm a little concerned that you went straight to DEFCON 2 over one letter from a collections agency about a 6-year-old phone bill for $317. You did all the right things to stop credit card fraud by filing a police report, putting a fraud alert on your credit reports and filing a complaint with the Federal Trade Commission, or FTC, but it may have been an overreaction to one notice from a bill collector.

By now you should have received credit reports from all three credit bureaus as part of the fraud alert process. Review the reports for any evidence of additional fraudulent activity.

If you see any additional fraudulent activity, take the additional step of placing a freeze on your credit reports if your state allows it. The Bankrate feature "Does your state allow credit freezes?" will let you know whether you can freeze your credit reports to new loan activity. As a victim of identity theft, you can request to place a "victim's statement" on your credit reports.

Bankrate's debt adviser, Steve Bucci, has some additional tips in his column "Undoing identity thief's credit report damage," which includes this piece of advice: "Ask the credit reporting agencies to put a block on the compromised accounts. This should keep them from being counted in your credit score."

Use the provisions of the Fair Credit Reporting Act, or FCRA, to dispute the inaccurate information in your credit report. The Bankrate feature "Disputing and correcting a mistake on a credit report" shows you how to file a dispute.

If it's an account on your credit report, then it's in your credit score.

Your lender should be able to tell you how the charged-off account has affected your credit score and how it affects the interest rate on the loan for your new house.

To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "financing a home," "saving & investing" or "money."