Identity theft remains a pressing concern in the modern economy. Despite monumental advances in online safety and security, widespread prevalence of fraud and ID theft remains. A series of studies confirm a staggering increase in identity theft over the years, notably the Javelin Strategy & Research Report. During 2017, an estimated 16.7 million identity fraud cases were reported. This alarming statistic follows hot on the heels of equally high numbers of identity theft cases a year earlier. Cyber criminals, hackers, and fraudsters are conjuring up inventive ways of stealing personal information, resulting in billions of dollars of theft. In 2017, it is estimated that some $16.8 billion was stolen in the US alone.

Data breaches affected almost 1 in 3 people in the United States, a 12% uptick from 2016. The 2017 data analysis presents another worrying statistic: this marked the first time that more SSN (Social Security Numbers) were uncovered than credit card numbers. While credit card companies have been focusing on developing new chip technology to make it difficult to counterfeit credit cards, criminals have been focusing on identity theft. By assuming somebody’s identity, criminals have successfully opened ‘fraudulent accounts’ in other people’s names and are bypassing the security mechanisms in place by secure microchip measures. A threefold increase in identity theft occurred between 2016 and 2017, with losses amounting to over $5.1 billion.

Incidents of Identity Theft and Fraud between 2014 and 2017

Several notable developments have taken place since 2014. The number of fraud complaints has dropped from 1,513,794 in 2014 to 1,138,306 in 2017. However, other consumer complaints have increased from 744,704 in 2014 to 1,166,244 in 2017. Identity theft complaints have remained constant over the years, with 332,647 reported complaints in 2014 and 371,061 complaints reported in 2017. In terms of absolute numbers of identity theft and fraud, 2014 figures of 2,591,145 were reported, and 2,675,611 incidents were reported in 2017.

The most significant trends include the sharp increase in other consumer complaints and the decrease in fraud complaints. During 2017, the top 10 US states with the highest number of identity theft cases included the following: Washington DC, Texas, Nevada, California, Maryland, Colorado, Delaware, Florida, Georgia, and Illinois. Cybercrime is playing a major role in incidents of identity theft, for individuals and businesses. With more information stored and disseminated online, servers and personal computers are continually at risk of being hacked. While the US levels are alarming, global incidences of cybercrime are staggering, with reports of $375 billion – $575 billion stolen in a 2014 McAfee study in tandem with the Center for Strategic and International Studies.

Measures to Combat Identity Theft and Fraud

This authority website provides a wealth of information on how best to combat identity theft and fraud. It is especially important in today’s digital age to regularly monitor credit reports for anomalies or inaccuracies. Security threats are real and significant damage can be done to a person’s credibility and financial standing by way of identity theft. Online protection mechanisms are already available and users are encouraged to become activists in their own credit protection campaigns.

Nowadays, there are several ways to store and transmit information: online in a cloud-based server, on a blockchain network, on a centralized server, and on a personal computing device. Traditional methods such as physical debit cards, credit cards, and banking information typically function side-by-side with online channels. Two important protections that are currently available to individuals are a credit lock and a credit freeze. Though these terms are used interchangeably, they are different and warrant careful consideration. As mentioned earlier, criminals, hackers and identity thieves are bypassing the usual routs of fraud, since microchips make it virtually impossible to duplicate credit cards.

Instead, criminals are turning to ID theft to open up accounts in other people’s names and then running up credit. The concepts of a credit lock and a credit freeze warrant careful consideration. For starters, a credit freeze indicates that the person initiating a credit freeze will notify the major credit bureaus – Transunion, Equifax, and Experian – that lenders will not be able to see the credit report until it is ‘un-freeze’ or ‘thawed’ by the account holder. The benefit of a credit freeze vis-a-vis identity theft and fraud is the following: When lenders cannot access an applicant’s credit reports, they will not issue a new line of credit. The process of unfreezing a credit report necessitates the use of a personal identification number, PIN.

Many folks mistakenly believe that ‘locking credit’ is akin to ‘freezing credit’. These are similar concepts since they both restrict lenders’ access to your credit report, but it is far easier to unlock a credit report via mobile, PC, or Mac. Credit locking services are typically available for a monthly fee, while credit freezing services are offered as a complimentary service. These elements should be factored into the equation when determining how best to combat instances of identity theft and fraud. In deciding whether to opt for a credit freeze or a credit lock, the following questions should be answered:

  • What level of identity protection are you interested in?
  • Are you interested in complimentary credit protections?
  • How user-friendly do you want your credit security features to be?

Evaluating the Efficacy of Credit Locks vs Credit Freezes

Equifax, Transunion, and Experian offer complimentary credit freezes to users. This service is best to use when credit reports and personal identification data has been compromised. Examples include hacked computers, stolen wallets, breaches in servers where personal financial information is stored, etcetera. Today, many security breaches take place away from the individual user, at centralized servers of places like Walmart, Target, Amazon, etc.

Alerts are typically sent out by credit bureaus when they believe a possible instance of fraud has taken place in a user’s account. Most consumers will do well to implement a credit freeze on their accounts, given the high risks that people are subject to. Federal law in the US mandates that credit bureaus offer free credit freezes to users. The provision of a PIN code (user generated or provided by the credit bureau) is necessary to thaw out the credit freeze. A word of caution is in order with a credit freeze, however: If the PIN number is lost, this can make it extremely difficult to thaw the credit freeze.

What is a Credit Lock and When Should it be Used?

A credit lock, by contrast, is not freely available at all credit bureaus. Transunion and Equifax offer credit lock services to users for free. However, Experian only makes this service free for a period of 30 days, after which a fee of $9.99 per month is levied on the credit lock services. Credit lock security mechanisms are best used as a preventative measure to protect sensitive personal information and a user’s credit report.

A credit lock is a useful tool for protecting one’s identity. A lock prevents credit reports from being accessed by companies intending to issue lines of credit. The fraudster with stolen ID in hand will find it difficult to get approved for a line of credit since the credit report of the said individual is not available. Federal law does not cover credit locks. In order to be effective, a user must register at all three credit bureaus to request a credit lock on their social security number. There are even apps available to implement these credit locks.

Transunion and its TrueIdentity offering provide the credit lock and credit unlock facility, but there are certain terms and conditions in the fine print and users must agree to receive marketing materials. Experian offers a pay to use service starting at $9.99 per month with identity theft insurance and a credit lock and also provides instant alerts when information changes at any of the 3 credit bureaus.

Equifax offers a credit lock feature known as Lock & Alert. With Equifax, there are no waivers which prevent users from filing class-action lawsuits if their information is compromised and identity theft results in significant financial hardship. Whether a credit freeze or a credit lock option is selected, users can still access a credit report and monitor their credit score unhindered.

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