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ID Fraud Protection Cut the costs of ID theft cover

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Laptop with chains Scams to get your credit card details are big business, and have stoked ID fraud fear up to fever pitch. But is there really anything to be afraid of? And what can you do to protect yourself?

There are several tips and tricks you can use to minimise the chances that fraudsters will get your details. Our Q&A below briefly explains all.

What is ID fraud?

ID FraudIt's when a criminal steals your identity and uses it to run up bills, applying for debts or services but leaving you to foot the bill.

It can be as simple as going through your rubbish bags, finding your old letters and bank statements and then applying for financial products using your details.

Actually, you're rarely liable for cash fraudulently spent, providing you can prove it wasn't you and that you haven't been negligent.

Why is it a problem?

It's a nightmare to sort out, and can leave you out of pocket. ID theft can also lead to unpleasant encounters with debt collectors, court actions and problems getting a mortgage. It's usually stressful as well as time-consuming.

So, while it's important to be concerned, taking the same sensible precautions as normal is what counts. Crucially, banks cover the cost of ID fraud as long as your negligence didn't let the fraudsters get the PIN. Though in this case, it's likely after they've paid out, they'd ask the Government to reimburse it.

However, since January 2013, some banks have said that if your PIN is easily guessable, eg 0000 or 1234, then they will not pay out on any fraudulent transactions made on your card. If your PIN is easily guessable - change it!

How do I protect myself?

There are a number of preventative measures:

Keep your PIN safe

Get a shredder

Lock down your phone

Anti virus softwareProtect yourself online

Always check bank statements

Regularly check your credit reference files

The prime worry is that criminals will take your identity details and use it along with other information to build a new profile, applying for new products in your name, which will go on to your records and destroy your credit history. Yet as long as we take sensible precautions ourselves, the risks are limited.

How does ID fraud work?

There are two ways that fraudsters normally operate:

PhishingPhishing Getting you to give up your details

First, they try to get your PIN or password by what is known as 'phishing'. This means they set up websites, or directly contact you by email, post or phone, claiming (and looking/sounding) like they are genuinely from your bank, and they ask you to enter/tell them your PIN.

If it works, they'll have all they need to access your money, and theft is easy.

So there's a very important golden rule. No matter whether it's a traditional letter, email or phone calls:

NEVER EVER EVER EVER give anyone your PIN or password.
Don't do it, don't think about it. Always assume it's a fake.

Sadly, the banks are culpable here. They do sometimes call and request some personal details or passcodes, and this doesn't help matters. Yet we have to protect ourselves, and not rely on the banks. Having said that, no bank should ever ask for your PIN.

Even if you think the contact is genuine, while it's a hassle, just don't give them an answer. Instead, use what you already have stored as their correct phone number, website or postal address, and contact it back. Then you can be sure you're dealing with the correct people.

You can read more and see examples in our Phishing guide.

ID fraudUsing your identity to get credit

ID theft Second, fraudsters may apply for products using your identity. To spot this, regularly check your credit reference files, which contain all data passed on by banks about how you do your banking.

If someone is stealing your identity, this is where you'll spot any products listed that you never applied for.

You should check your credit file at least once a year. Read the Credit Rating guide to find out how. With cashback sites and free trials, you can even get paid to check.

Unfortunately, many people don't take this precaution, leaving themselves hostages to fortune. Always, always check your credit file at least once a year. Otherwise fraud can continue for years without you knowing.

The same applies if you receive goods or services you haven't bought, or are notified you've been accepted for financial products or phone contracts that you didn't apply for. All these are warning signs someone's been using your identity.

If you think you've been a victim of fraud, report it to ActionFraud (tel 0300 123 2040), the UK's national fraud reporting centre. It may also be able to offer help and advice on what to do.

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Do I need ID fraud insurance?

No no no no NO!

An entire industry has built up selling us the fear of ID fraud, and then trying to sell us insurance against it. In some ways, these companies are almost, although not quite, as bad as the fraudsters themselves. Many don't mention that ID theft insurance only covers the cost of salvaging the mess, not the money lost through the fraud.

Most non-high net worth individuals don't need to pay for these expensive insurance policies. While ID fraud is a hassle, you're covered by the banks unless you're culpable.

ID fraud insurance should be differentiated from payment protection insurance, which is commonly sold with credit cards. The idea is it'll make some payments for you, usually for a year, if you are unable to (eg, if you lose your job).

There have been a myriad of cases where PPI has been mis-sold, ie, borrowers didn't realise they were signing up for it, or it was totally unsuitable for them, and some big lenders have been fined.

So it's always worth checking you aren't getting more than you bargained for when you fill in the application. Then check your statement each month to check you aren't inadvertently paying for extras if you didn't ask for them.

If you think you've been mis-sold identity theft insurance then you could be due compensation. A company called CPP, plus banks that mis-sold identity theft and card protection insurance have set up a redress scheme to compensate customers. Read the Reclaim CPP Card Protection guide for full info on the mis-sold product and what you need to do next.

Can I get more protection for free?

Not any more - the credit cards offering full ID assistance tend all to have annual fees. If you have the Capital One Aspire Elite* credit card (annual fee £120, 19.9% rep APR), or apply for a new one, you'll get a free subscription to its ID Fraud Alert service. Importantly this alerts you when changes are made to your credit record.

The card's hideously expensive, and you need to earn £50,000 to get it. If this isn't you, and you only want the ID Fraud benefits, it's cheaper to sign up to alert systems offered by credit reference agencies.

Full details: Capital One Aspire Elite

Free ID fraud assistance for Direct Line home insurance customers

Most credit card providers will monitor your account for suspicious activity and will contact you if there are transactions that do not fit in with your usual spending patterns to check that you are the one making the transactions. However, this is not a failsafe, so it is important to check your statements, and to report cards missing as soon as you realise.

Bank accounts with assistance

Packaged bank accounts usually come bundled with travel, breakdown and mobile insurance in return for a monthly fee. With some, ID theft assistance is also included though what this actually entails varies.

Often the service they offer gives little more than what a bank should do anyway if fraudulent payments have been made on your account or someone has used your identity. They're not worth getting if that's all you want them for, and often offer little more than an advice line.

Some do come with more than that though, so if you're planning to use the other benefits too, NatWest below might be a good option, but see our Packaged Account Analyser for more.

Full details: NatWest Select Silver, £10/month - includes European travel, mobile & Lovefilm

Too late! I think my ID has been stolen

Need instant help? If you think you've fallen victim, Experian's* CreditExpert monitoring includes access to an ID fraud protection helpline. This costs £7.99 a month, but it offers a free 30-day trial. So if you need it, simply sign up to the service, use the ID fraud helpline and then cancel the service before the 30 days is up. See the Credit Scores guide to find out how.

If you've noticed unusual account activity and genuinely suspect someone is using your identity to apply for new products, then contact the fraud prevention service CIFAS, and ask it to put a 'protective registration' on your credit reference file. This costs £20, and alerts all lenders who see it to carry out further checks before approving credit applications.

However, don't use this lightly. Getting Protective Registration on your files will slow up any credit searches, and may mean you don't get approved for things you need, from credit cards to mobile phone contracts.

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