Credit, Identity Theft, and the New "Red Flags Rule"

Credit has been under attack lately, and in a state of change. Thus, the new "Red Flags Rule" that went into effect on May 1.

This rule directs car dealers to play "snoop" in order to prevent ID theft. So, if you apply for a loan to buy a car - new or used - the dealer may ask you questions that you feel are none of his or her business.

For instance: "Do you always use your middle initial?" "What's the balance on your American Express Card?" These are questions designed to trick someone who isn't you.

Here's how: They ask about the American Express Card because your credit report shows you don't have one. That's something you would know, but a thief probably wouldn't know. So if "you" stutter and say you aren't sure, because your spouse is the one who keeps track of such things, it's a clear sign that "you" aren't you.

Dealers are also looking for other inconsistencies, such as a name and address on your application that doesn't match your driver's license or the address listed in your credit report.

Dealers will now be required to document the steps they've taken to assure that the person buying the car is the same person whose credit is being used for the car loan - or lease. If they fail to do so, they will be subject to fines.

So that you don't become suspect when using your own credit, make sure to take these steps:

If you move, be sure to notify all of your accounts and get your driver's license updated. If you move to a different state, get a new driver's license in the new state Check the photo on your driver's license - if it doesn't look like you, either request a new photo or take along additional photo ID that does look like you. Driver's license photos are notoriously bad to begin with - but if you've changed your hair color, shaved off a beard or moustache, lost or gain weight, or have just recovered from a long illness, the picture might not resemble you at all.

Use of stolen identity at car dealerships is relatively rare - but now that the definition of "financial institution" has been expanded to include any business that includes loans and leases, dealerships are subject to the same regulations as other financial institutions. Your credit's your life, treat it as such.

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