How to Check for and Prevent Financial Fraud

Quick answer

• Regularly monitor your bank and credit card statements for unfamiliar transactions.
• Set up transaction alerts with your financial institutions.
• Review your credit reports annually for suspicious activity or accounts you didn’t open.
• Shred sensitive documents before discarding them.
• Use strong, unique passwords for online accounts and enable multi-factor authentication.
• Be wary of unsolicited requests for personal information.

What to check first (before you act)

Your Financial Statements

Before taking any action, meticulously review your most recent bank statements, credit card statements, and any other financial account summaries. Look for any transactions, withdrawals, or purchases that you don’t recognize. Even small, unusual amounts can be an early indicator of fraudulent activity.

Your Credit Reports

Obtain copies of your credit reports from the three major credit bureaus: Equifax, Experian, and TransUnion. You are entitled to one free report from each bureau annually through AnnualCreditReport.com. Scrutinize these reports for any accounts you didn’t open, inquiries you didn’t authorize, or changes to your personal information that you didn’t make.

Your Identity Information

Verify that your personal identifying information, such as your Social Security number, date of birth, and address, is accurate across all your financial accounts and credit reports. Any discrepancies could signal that someone has tampered with your identity.

Unusual Account Activity

Beyond just statements, check for any unusual activity on your online banking or credit card portals. This might include unexpected changes to your contact information, new beneficiaries added to accounts, or changes to payment settings.

Step-by-step (fraud prevention workflow)

Step 1: Secure Your Mail

What to do: Ensure your physical mailbox is secure and retrieve mail promptly. Consider a locking mailbox if mail theft is a concern in your area.
What “good” looks like: You consistently collect your mail daily and your mailbox is not easily accessible to unauthorized individuals.
Common mistake and how to avoid it: Leaving mail in your mailbox for extended periods. Avoid this by checking your mail daily, especially around the time bills or sensitive documents are expected.

Step 2: Shred Sensitive Documents

What to do: Use a cross-cut shredder for any documents containing personal or financial information before discarding them. This includes old bank statements, credit card offers, insurance forms, and even pre-approved credit applications.
What “good” looks like: All documents with sensitive data are rendered into unreadable confetti.
Common mistake and how to avoid it: Tossing documents with personal information directly into the trash. Always shred first.

Step 3: Monitor Bank and Credit Card Statements

What to do: Review your bank and credit card statements monthly, ideally as soon as they become available. Look for any transactions you don’t recognize.
What “good” looks like: You can account for every transaction listed on your statements.
Common mistake and how to avoid it: Glancing over statements without scrutinizing them. Take the time to verify each charge.

Step 4: Set Up Transaction Alerts

What to do: Contact your bank and credit card companies to set up alerts for various types of transactions. This can include alerts for purchases over a certain amount, online transactions, or international transactions.
What “good” looks like: You receive immediate notifications for potentially suspicious activity.
Common mistake and how to avoid it: Assuming alerts are automatically set up. Proactively contact your providers to customize your alert preferences.

Step 5: Check Credit Reports Regularly

What to do: Obtain your free credit reports annually from Equifax, Experian, and TransUnion via AnnualCreditReport.com. Review them for any accounts, inquiries, or personal information changes you don’t recognize.
What “good” looks like: Your credit reports accurately reflect your financial history and contain no fraudulent entries.
Common mistake and how to avoid it: Waiting until you need a loan to check your credit reports. Check them at least annually to catch issues early.

Step 6: Use Strong, Unique Passwords

What to do: Create complex passwords for all your online financial accounts. Use a combination of upper and lowercase letters, numbers, and symbols. Avoid using easily guessable information like birthdays or pet names.
What “good” looks like: Your passwords are long, intricate, and unique for each financial service.
Common mistake and how to avoid it: Reusing the same password across multiple accounts. A data breach on one site could compromise all your accounts.

Step 7: Enable Multi-Factor Authentication (MFA)

What to do: Wherever possible, enable multi-factor authentication (also known as two-factor authentication or 2FA) for your online accounts. This adds an extra layer of security, requiring more than just a password to log in.
What “good” looks like: Accessing your accounts requires a password plus a code from your phone or a security key.
Common mistake and how to avoid it: Skipping MFA because it seems inconvenient. The added security is well worth the minor inconvenience.

Step 8: Be Cautious of Phishing Attempts

What to do: Be highly suspicious of unsolicited emails, texts, or phone calls asking for personal or financial information. Legitimate organizations rarely ask for sensitive data this way.
What “good” looks like: You can identify and ignore or report phishing attempts without divulging any information.
Common mistake and how to avoid it: Clicking on links or providing information in response to urgent or suspicious messages. Always verify the sender through a separate, trusted channel.

Step 9: Secure Your Devices

What to do: Ensure your computers, smartphones, and tablets are protected with up-to-date antivirus software and operating system updates. Use screen locks and consider encrypting sensitive data.
What “good” looks like: Your devices have robust security measures in place to prevent unauthorized access.
Common mistake and how to avoid it: Neglecting software updates or not using password protection on your devices. This leaves them vulnerable to malware and direct theft.

Step 10: Limit Information Sharing

What to do: Be mindful of how much personal information you share online, especially on social media. Avoid posting details like your full birthdate, mother’s maiden name, or vacation plans that could be used for identity theft.
What “good” looks like: You consciously control the personal information you make public.
Common mistake and how to avoid it: Over-sharing personal details on social media platforms. Assume anything you post could be seen by anyone.

What affects your score (plain language)

• Payment History: Consistently paying your bills on time is the most significant factor. Late payments can severely damage your credit.
• Credit Utilization Ratio: This is the amount of credit you’re using compared to your total available credit. Keeping this ratio low (ideally below 30%) is beneficial.
• Length of Credit History: The longer you’ve had credit accounts open and in good standing, the better. This shows a track record of responsible credit management.
• Credit Mix: Having a variety of credit types (e.g., credit cards, installment loans) can positively impact your score, demonstrating you can manage different forms of debt.
• New Credit: Opening many new credit accounts in a short period can signal higher risk and may temporarily lower your score.
• Public Records: Bankruptcies, liens, and judgments can significantly harm your credit score.
• Authorized User Status: Being an authorized user on an account with a good payment history can help your score, but the primary cardholder’s activity matters.
• Age of Accounts: The average age of your accounts, including older, well-managed ones, contributes positively.

What NOT to do while improving credit: Avoid closing old, unused credit accounts if they have a good payment history, as this can reduce your overall available credit and potentially increase your utilization ratio. Also, do not apply for multiple credit cards or loans simultaneously, as this can lead to numerous hard inquiries, which can lower your score.

Common mistakes (and what happens if you ignore them)

| Mistake | What it causes | Fix