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Dr. Don Taylor, CFA, Bankrate.com advice columnistFighting back against ID theft

Dear Dr. Don,
I was recently notified by my credit card company of a fraudulent transaction on one of my accounts. They are closing the account and opening a new account and I will not be responsible for the fraudulent charges. But now what do I do? I am scared to death about identity theft.

Should I put a fraud alert on my credit reports; contact the FTC, BBB online? The last time I used the card was online two months ago. Two fraudulent charges were attempted, one from out of state that the credit card company declined and the other from out of country -- but both on the same day! Do I contact the places that I last did business with? How do I know if it's my computer that was hacked? Any advice would be a great relief.
-- Jane Gypped

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Dear Jane,
If your state allows it, I'd suggest that you put a freeze on your credit reports rather than using the fraud alert feature. A Bankrate feature, "Credit freezes for all or victims only?," explains freezes in greater detail and links to a list of the states where you can freeze your credit reports. Some states only allow victims of identity theft to freeze their credit reports while more forward-thinking states allow all residents to freeze their reports. If you can't freeze your files, then fraud alerts are the way to go.

Another precaution is to monitor your credit card and other financial account activity. If your financial institution offers account aggregation as a free service, you can view the activity in all your financial accounts on one Web page each morning. A Bankrate feature, "Account aggregation: All-in-one convenience," explains account aggregation services. If that fails, your credit card providers should offer this ability on your individual accounts.

Monitoring your credit reports on a regular basis is a good idea. The monitoring services offered by the credit bureaus are fairly expensive, so I'd suggest a do-it-yourself approach. You're entitled to at least one free credit report annually from every consumer reporting agency under the provisions of the Fair and Accurate Credit Transactions Act. Personally, I rotate my credit report requests so I review my credit report from one of the major credit bureaus -- TransUnion, Experian or Equifax -- every four months. Bankrate has the contact information to help you request your free reports.

Since you're a victim of fraudulent activity on your credit card, you're entitled to a free copy of your credit report based on that fraudulent activity. The credit bureaus send out the reports when you put the fraud alert on your report. 

If, after reviewing your credit reports and transaction histories, those two charges were the only fraudulent activity on your accounts, I'd suggest that you take your fraud preparedness down to "DEFCON 4" and let the fraud alerts, frozen reports, account monitoring and periodic credit report reviews suffice without contacting merchants, the Federal Trade Commission or the Better Business Bureau.

I can't tell you whether your computer has been hacked or how identity thieves were able to use your information to attempt to make purchases. As a victim of the ChoicePoint thefts, and a potential victim of the DSW and Bank of America security breaches, I understand your concerns about identity theft. Take the steps I've recommended and your vigilance will give you some peace of mind.

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."

Bankrate.com's corrections policy -- Posted: Oct. 11, 2006
More Q&A stories from Dr. DonAsk a question
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