Why should I worry about credit fraud?

If you have never lost a credit card or had one stolen from you, you may feel like credit fraud is not your problem.

But the truth is credit fraud affects us all. When criminals obtain goods or cash through credit fraud, it is the credit card issuer that bears the burden of the loss – a cost that may be passed on to its cardholders.

Credit fraud poses a growing problem

Credit fraud is on the increase, especially in one of its most insidious forms: identity fraud. That's why it's important to check your credit report regularly.

There are several different kinds of credit fraud and some of the most threatening involve much more than a stolen credit card. A lost or stolen card may be what we think of first when we think of someone using our credit – a fraud we know we can halt by reporting the card lost or stolen.

But what if someone is using your credit while your card is safely in your pocket or purse?

Credit fraud can happen without the victim's knowledge

A stolen account number can often be just as effective for a criminal as a stolen credit card, especially if information such as the expiration date or your postal address is also available to him or her. You may not know someone is using your account until you notice charges or cash advances you did not make appearing on your monthly statement.

Criminals can steal credit account numbers in many different ways, such as collecting them in telephone scams, copying them from credit cards when the owner isn't looking, or gathering them from discarded receipts or account statements in people's trash.

Gathering information from people's rubbish, also known as "bin raiding," is another way that fraudsters get their hands on your valuable personal details.

"Identity fraud" is when someone uses your personal information, such as your name, address and date of birth to either take over your existing credit accounts or open new accounts using your identity. A fraudster might also rent a flat, take a job, or even commit crimes using your name, but identity fraud more usually just involves using your good credit status without your knowledge.

Tactics for stealing your identity include stealing personal information and then using it to apply for credit or, sometimes, stealing pre-approved credit card offers from your rubbish or your post and sending them in with a change of address.

A clever fraudster can use your name and information for months without your knowledge, sometimes making the minimum payments on any accounts they open so as to keep that credit line available longer. You might not find out what is happening until they use the credit to its maximum limit and then stop paying, causing the lender to send collectors out to find you to settle the debt.

Checking your credit report regularly is one of the few ways to catch identity fraud early before it goes that far. Just as reviewing your credit card statement can reveal purchases you did not make, reviewing your credit report can reveal activity on accounts you don't use or new accounts you did not open, alerting you to the possibility of identity fraud.

Take steps to protect yourself and minimise the costs of credit fraud

There are a number of common sense measures you can use to effectively defend yourself against identity fraud and minimise the effects of the impact. Here are just a few: