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One of the most scariest types of identity theft is new account fraud. It happens when an identity thief steal your personal information, open a series of new credit card accounts, loans or other account under your name. According to a new Federal Trade Commission (FTC) study, 8.3 million U.S. adults become victims of ID theft each year. Consumers Union estimates that this amounts to more than 22,000 victims per day and 15 victims per minute. After you are a victim of ID theft, the out of pocket cost varies widely but 10% percent of all ID theft victims reported costs of $1,200 or more, and 10% of victims of new accounts and other frauds reported out of pocket costs of $3,000. One quarter of all new accounts victims reported expenses of at least $1,000. More than half of consumers (56%) who suffered new account fraud did not discover the fraud until after the first month, and for 24% of consumers, it took more than six months to discover new account fraud.

I wrote a post about credit freeze and mentioned how to use credit freeze to prevent identity theft. Today I’m going to write more details about this. Because credit freeze is very useful to prevent ID theft.  A credit freeze, also known as a security freeze, credit report freeze, a credit report lock down, a credit lock down, or a credit lock, allows an individual to control how a U.S. consumer reporting agency (Equifax, Experian, TransUnion) is able to sell his or her data. The credit freeze locks the data at the consumer reporting agency until an individual gives permission for the release of the data. In this way, a credit freeze allow us to stop thieves from getting credit under our names. When we choose to freeze our credit, a business will not be able to open new accounts for a thief until you permit to do so. Placing a credit freeze does not affect your credit score – nor does it keep you from getting your free annual credit report, or from buying your credit report or score.

When you place a security freeze on your file, you will be provided a personal identification number or password to use if you choose to remove the security freeze from your file or authorize the temporary release of your credit report for a specific person or period after the security freeze is in place. The cost of placing, temporarily lifting, and removing a credit freeze also varies.  Identity theft victims might get free credit freeze in many states while other consumers might have to pay $10 for this service. As the credit freeze laws varies according to states, you can find more helpful information from here. Once you decide to temporarily lift your freeze, you have to contact Equifax, TransUnion or Experian and provide the following information:

1. Sufficient identification to verify your identity.
2. Your personal identification number or password provided by the credit reporting company.
3. A statement that you choose to remove the security freeze from your file or that you authorize the reporting agency to temporarily release your consumer report.

It’s very obvious that a credit freeze is very helpful to keep an identity thief from opening most new accounts in your name. However, it’s not an all-purpose solution to all kind of identity theft. It will not protect you from an identity thief from using your current credit cards or other accounts. It is also helpless when a identity thief wants to use services that don’t do a ID check in your name. If there’s identity theft already going on when you place the credit freeze, the freeze won’t be able to stop it. You should also consider the cost and hassle that credit freeze might bring in before you place a credit freeze on your credit report.

According to the latest class-action settlement, eligible consumers can get up to 9 months of free credit monitoring service from TransUnion!

Yesterday TransUnion announced that it will soon provide eligible U.S. consumers up to 9 months of free credit monitoring and related services. This result is part of a settlement of a lawsuit that has been pending for a decade and arose from a product has been terminated in 2001 by TransUnion. The lawsuit claimed that TransUnion has violated the Fair Credit Reporting Act when it sold consumer information to businesses for their targeted marketing products. As we know, Fair Credit Reporting Act allows TransUnion and other related companies sell publicly available data to other businesses but nor private information. TransUnion is claimed to sell private consumer information to businesses which is a violation of the law, although TransUnion said it had not violate the law. TransUnion discontinued that practice is 2001.

As a consumer, what can you benefit from this class-action settlement?

1. 6 months of credit monitoring service, giving you unlimited access to you credit report and credit score. You will also receive email alerts for any changes occur on your credit profile.
2. 9 months of credit monitoring service, plus unlimited access to your credit report and credit score. You can also use TransUnion’s mortgage simulator service.
3. You can also sign up for cash payment instead of free service provided by TransUnion. However, such cash payment will not be available in 2 years. At the same time, the cash payments can only be made when the 75 million fund has been used up for any post-settlement claims.

If you choose the first option, you will sacrifice your right to enter a class-action claim against TransUnion. If you choose second option, you will lose any further legal claims against TransUnion.

Are you eligible?

According to the settlement, any individual who had an open credit account or an open line of credit from a credit grantor (bank credit card, department store credit cards, retails store credit cards, mortgage, auto loans, personal loans, and student loans) located in the United States anytime from January 1, 1987 to May 28, 2008 is able to choose the above mentioned options.

This free credit monitoring service seems to be useful for you to bump you hard inquiries on your credit report.

“Hard inquiry” refers to a credit pull initiated by you, and it does affect your credit score. If you are curious about your credit score, you might find out that a hard inquiry might drop you credit score 5~7 points. If you have many hard inquiries in a short time period, your application for a new credit might get rejected even if you still maintain your credit score at a relatively high level. The reason is very simple, you are requesting too many credits from credit issuers such as banks, credit card companies and other financial institutions. However, “soft inquiries” will never affect your credit scoring. Because soft inquires are invisible to credit grantors. (Hard Pull and Soft Pull)

Usually hard inquires will disappear from your credit report in about 25 months in all three credit report agencies (TransUnion, Experian, Equifax). But do you want to bump off those notorious hard inquiries from your credit report earlier than 25 months? If you want to knock hard inquiries off of your credit report, there is a very easy way. I personally was able to get rid of all of hard inquiries on my credit report at TransUnion and Equifax. I applied for many credit cards in last August: Blue from American Express, Starwood Preferred Guest Card from American Express, Citi CashReturns Card, Discover Open Road Card, BOA Rewards American Express Card, CapitalOne No Hassle Cash Card etc. There are more than 12 hard inquires on my TransUnion and Equifax credit reports. However, right now, there is no hard inquiry on my TransUnion and Equifax credit reports!

The method is popularly named as “bumpage”—the process of pulling your personal credit report repeatedly in a short time period (usually 1 pull per 1 or 2 days or several times per week). In this way, you can generate a lot of soft inquiries on your credit report and eventually knock hard inquiries off of your credit report. The reason why you can bump off hard inquiries is credit report agencies have only limited space to store your personal information. If you throw in much new information in their system, they tend to delete older information. (Note: only works for inquiries.) However, “Bumpage” only works for TransUnion and Equifax.

How can you generate soft inquiries? There are many credit services on the market which allow you to pull your credit report in a daily manner. The most famous one is TrueCredit.Com and other credit services from TrueCredit but under other names (e.g. NationalCity Identity Protect). If you have an American Express card, you can choose CreditSecure from American Express. My “Know Your Credit Score” post have summarized some credit services on the market for your reference. However, there are many free ways to pull soft inquiries for you. For example, the pre-determination process from HSBC and BOA can generate a soft inquiry on your credit report every time you check for a credit card offer from them. The credit limit increase button in your online account at American Express can also generate a soft inquiry for you for free!

If you use only one credit service and pull your credit report daily, it will takes you about 2 months to start bump your hard inquiries. If you use multiple credit services at the same time, the bumpage process can be accelerated.

However, you might get rejected by TrueCredit or other credit service providers due to your excessive access to your credit report! But it’ highly YMMV.

Important update: This trick is not working for TransUnion now. Some one reported that the bumped inquiries came back on their credit reports again.

Today I received an email from one of my readers asking about the free credit report stuff. He seems to order a “free” credit report from FreeCreditReport.Com after he watched the ad in the TV. Then he realized that he was billed $14.95 per month. Yes, it’s not free! If you google with “freecreditreport.com”, you can see a lot of ripoff reports about freecreditreport.com. Be careful then!

I have seen a lot of commercials from FreeCreditReport.Com including the popular commercial Dream Girl. However, the truth is FreeCreditReport.Com is not free! Don’t be fooled! The only website you can get your free credit report is AnnualCreditReport.Com which is supported by the federal government.

Here I put some of the famous commercials by FreeCreditReport.Com together. I don’t want them to fool people again.

This one is not!!!

It’s interesting to see that Warren Buffett has a FICO credit score of 712 according to the Fortune Magazine. (2008, March 31, The Oracle’s Credit Crisis) Well, how can that be? We all know that Warren Buffett is one of the wealthiest men on the planet?

But believe me or not, if a bank ever denies Warren Buffet’s application for a credit card, Warren will go on CNBC and say that bank has really bad economic outlook and then watch and laugh as its stock price dips 10% immediately. Even Warren has a very low credit score, no banks will refuse to provide financial services to him. Maybe he is also a Centurion Card holder.

Anyway, regardless whether you are a billionaire or not, you FICO credit score always tells your lenders the same fact: based on your past credit actions, how likely are you to become seriously late in repaying your creditors during the next couple of years? Your income or net worth aren’t factored into the FICO score – only your history of paying back your debts as documented in your credit report.

Want to have a better credit score than Warren? Tips to boost your credit score:

1. Never pay your bills after due date—never leave a late payment in your credit profile.

2. Never carry a huge balance on a single credit card—increase your balance to credit limit ratio will hurt your score.

3. Never open a new account frequently—open a new account when it’s necessary or when you’re doing AOR.

4. Always check your credit card statement—find out any suspicious credit fraud activities or identity thefts.

5. Always check your credit report—you can find a lot of ways to access your credit report for free.

I have many individual posts about how to get your free credit score and credit report. You can get a free copy of your credit report every year from www.annualcreditreport.com which is a government supported website. However, this website doesn’t provide credit score. Then how can you get your credit score for free? Let me tell you……

WaMu Platinum Visa Credit Card

Actually, this card was formerly issued by Providian which was then acquired by WaMu one year ago. From then on, all the WaMu credit cards will provide free credit score to the card holders. You can see your credit score once you log in you online account at www.wamucards.com. The credit score is based on your TransUnion credit report and is updated every month. Recently, they are sending out some invitations with sign-up bonus. Some readers report that if you don’t use this card for a while, they will close your account due to inactivity.

I have to mention that WaMu just launched a new credit card—ESPN Total Access Visa Card. This card is easy to get. If you can’t receive the invitation from WaMu and want to take advantage of the free credit score service, you can try for this card.

CreditKarma.Com

I have an introduce about this website here. They provide FAKO credit score based on your TransUnion credit report. (Although they claim that they can pull your credit report from any of 3 credit bureaus, you’d better believe that they only use TransUnion credit report.) Yes, it’s free! They will not charge you for your free credit score. But they have you credit status on hand. They can make money by corporate with many financial institutes by promoting some financial services to you.

Prosper and Lending Club

The above two mentioned websites are famous person-to-person lending clubs. They will pull your credit report, if you sign up as a borrower there. Instead of a credit score, they will give you a credit grade. By referring to the credit grade, you can roughly know your credit score. If you have a very good credit score, your default loan rate will be much lower than those with bad credit grade. You may not familiar with these websites. Currently, they are offering $25 sign-up bonus.

E-Loan.Com

You can also get a free credit score at eloan.com! It’s very simple. Click this link to eloan.com. You will see a variety of credit services provided by eloan. But they are not free! At the bottom of that page, you will see ” Free Credit Score (Credit Score Only)“. That’s not FICO score and is based on your credit profile at Experian. In fact, it’s supposed to help you to choose some better mortgage rate. It’s valid only for once. You can choose when to use it.

I hope this post will be of any help for you all!

I believe most of us are familiar with this funny commercial from freecreditreport.com. However, I have to tell you that this commercial for “FreeCreditReport.com” is not only somewhat inaccurate but it’s misleading. It’s actually advertising something that’s not free! The freecreditreport.com, owned by credit bureau Experian Group Ltd, offers consumers a chance to obtain their credit reports and credit score by signing up for a paid subscription service. They will charge you $12.95 per month by signing up a program named Triple Advantage. If you agree to sing up the contract, then your nightmare will be coming. It’s really hard to get rid of the charges from Triple Advantage. You can google “Triple Advantage” on the web and see how many victims are claiming they are being charged by Triple Advantage. The only way to get rid of them is to close the credit card account with them and request your credit card company to issue you a new one. As far as I know, the Florida state attorney general’s office has opened an investigation into potentially misleading advertising by FreeCreditReport.com.

The only web site that you can get free credit report is annualcreditreport.com. You can request to access to your credit report from 3 credit bureaus once every year. If you want to check out your credit score, you might have to read this post.

According to The Wall Street Journal, Fair Isaac, which created the popular FICO credit score, is making some small adjustments to the way it calculates American people’s credit scores.

The penalties for occasional slip-ups in making monthly payments will be reduced; while those who repeatedly make late payments will see their scores fall more.

People who are using more than 80% of their limits on credit cards will see their scores fall more. (It’s important to get a huge credit limit and lower the usage of your credit.)

Those who manage a variety of loans — such as having a mortgage, an auto loan, and credit cards at the same time — will see boost of their credit scores only if they can perfectly manage their credit—never a late payment.

Applying for credit too many times won’t hurt your score any longer, which used to lower your score. (This is definitely good news for those deal catchers.)

In a word, the changes seem to make clearer distinctions between good credit risks and bad ones.

The changes of the new credit scoring system intend to provide better prediction on whether you are a good borrower or not. If you are already have a good credit score, please keep doing what you are doing now. If you are always missing the payments, you’d better knock your head and figure out every method you can to make timely payments.