Ten Tips To Prevent Financial Chaos!

If you don't want to fall victim to identity fraud, read these handy hints. Taking precautions now will prevent nightmares later.

As it is National Identity Fraud Prevention Week (check out the Stop ID Fraud website), I thought I'd take the opportunity to warn you about this financial scam.

Your personal information is surprisingly easy to steal and can be worth thousands of pounds to a thief. Armed with personal and financial data, a fraudster can apply for credit in your name, spend a fortune, and then disappear. Alas, you only find out months later when your application for a credit card or personal loan is turned down -- or when debt collectors and bailiffs start appearing at your door!

Identity fraud ('ID fraud') has been described as "the UK's fastest-growing crime" and, although I doubt the accuracy of this claim, the number of cases has been increasing dramatically. The following table shows the number of people who have fallen victim to ID fraud/theft, according to fraud-prevention service CIFAS:

Source: cifas.org.uk

As you can see, over the past seven years, almost 300,000 people have been hit by ID fraud, theft or attempted impersonation. Furthermore, according to Which? magazine, one in four adults (25%) has been a victim of ID fraud or knows someone who has been. Hence, ID theft is a national problem on a grand scale!

However, the good news is that CIFAS members (which number 250 and include banks, building societies and mortgage lenders) are getting better at discovering fraud at the application stage. So far this year, CIFAS members have detected and prevented two-thirds (67%) of dodgy applications at the earliest stage, compared to only half (50%) a year ago.

If you've had personal documents stolen, or someone has attempted to hijack your identity, one answer is to register for the CIFAS Protective Registration Service. This service, which costs £11.75 including VAT, ensures that all further applications for credit (and insurance claims) will be subjected to particularly careful scrutiny in order to ensure that they are genuine.

Here are another ten tips to prevent ID theft, courtesy of The Motley Fool and online bank Smile:

1. Check your statements

If you notice anything odd on your statements, or you think that someone may have accessed your accounts, contact your bank or credit-card company immediately.

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2. Protect your paperwork

Destroy any unwanted bills, receipts, statements and even junk mail using a shredder. If a piece of paper has your name and address or any other personal data on it, then it could prove useful to a conman.

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3. Keep your login details secret

Watch out for 'shoulder surfers' who may try to take note of your account information. Don't choose or change your security details in any public place.

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4. Keep your plastic cards safe

Always keep your cards in your possession, never let them out of your sight, and never tell anyone your Personal Identification Number (PIN). When using a cash machine, or a Chip-and-PIN terminal in a shop, beware of onlookers when entering your PIN.

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5. Keep security information private

Don't use passwords which are easy to guess, such as 'password'! Don't tell anyone your security details, and never, ever write them down. Change your security information immediately if you suspect that anyone else may have gained access to it.

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6. Check your credit file

Make sure that your credit file is up to date and accurate. Look for any unusual activity, such as new accounts which you didn't open, credit searches by companies with which you haven't dealt, or links to addresses which you don't recognise.

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7. Don't trust unknown callers and websites

Do you really know who is calling you? It may be a conman claiming to be from your bank, so never give information to an unknown caller who can't prove his/her identity, regardless of who they claim to be. Call back on your bank's listed telephone number if you have any suspicions. Also, always use your bank's registered Internet address -- never click on a link in an email, regardless of its source.

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8. Be careful when moving home

When you move home, inform all the relevant organisations of your change in address. Use the Royal Mail Redirection Service for at least a year to make sure that all post is forwarded to your new address. As soon as you've moved, contact your local authority and register to vote on the Electoral Register at your new address. Keep tabs on your old address to prevent replacement credit cards or mail-order catalogues falling into the hands of a fraudster -- giving the new occupants a sheet of redirection labels can help.

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9. Be cautious with new transactions

Make sure that you're dealing with a genuine and legitimate company before handing over any account details, especially if it has approached you.

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10. Keep important documents secure

Keep important documents (such as your birth/marriage certificates, driving licence and passport) in a safe place -- but not all together, if possible. Many thieves prefer to steal these items rather than electrical equipment or jewellery, because they are easily taken and sold on -- and they weigh a lot less than a 48-inch widescreen television!

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One final warning: a growing number of banks are flogging 'ID protection services' from the likes of Card Protection Plan. Typically, these cost upwards of £5 a month or so. However, consumer champion Which? rates these services as offering very poor value for money, so they are best ignored!

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