Published in October 2, 2023
Credit scores play a pivotal role in financial stability and access to various services in Australia. They reflect an individual’s creditworthiness and are used by lenders, landlords, and even employers to make important decisions. However, with the digital age comes an increased risk of credit scams and fraudulent practices that can harm your financial well-being.
Credit scams can take various forms. These may include identity theft, phishing scams, and deceptive lending practices. Scammers are becoming increasingly sophisticated, making it crucial for individuals to be informed and proactive in safeguarding their credit information.
A credit score is a numerical representation of an individual’s creditworthiness, typically ranging from 0 to 1200, depending on the credit reporting agency. It’s calculated using various financial data, including credit history and repayment behaviour.
In 2022, credit card fraud topped the list of scams in Australia, accounting for the largest chunk of financial losses, totalling a staggering $1.2 billion, as reported by the Australian Payments Network (AusPayNet). Trailing behind were investment fraud at $800 million, identity theft at $600 million, and various other scams at $500 million.
Here are some of the most common types of credit scams:
Identity theft is a widespread credit scam where criminals steal your personal information, such as your Tax Identification Number or driver’s license, to open new credit accounts. They may use your identity to take out loans or credit cards in your name, leaving you responsible for the debt.
Phishing scams involve scammers posing as legitimate organisations, like banks or government agencies, and sending fraudulent emails, text messages, or phone calls to trick you into revealing sensitive information, such as your credit card numbers or login credentials. In Australia, phishing attempts often target individuals by impersonating banks like the Commonwealth Bank or the Australian Taxation Office (ATO).
Scammers promise to repair your credit by removing negative information from your credit report, even if that information is accurate. They typically charge high fees for their services and often provide no tangible results. It’s essential to be cautious when dealing with credit repair companies and to verify their legitimacy.
In this type of scam, fraudsters promise to provide you with a loan, credit card, or debt consolidation service but require you to pay an upfront fee before delivering on their promises. Once you pay the fee, they disappear, leaving you without the promised financial assistance.
Scammers pose as debt collectors and contact you, claiming that you owe money on a debt. They may use threats, intimidation, and harassment to pressure you into making immediate payments. It’s crucial to verify the legitimacy of any debt collection agency contacting you and to know your rights under Australian consumer protection laws.
When fraudsters get hold of your credit card information, they might use it to make unauthorised transactions or withdrawals. This may take the form of physical theft, the use of skimming technology, or internet hacking.
Carding is a type of credit card fraud where scammers use stolen credit card information to make small online purchases to test if the card is still active and has available credit. Once they confirm the card works, they may make larger unauthorised transactions.
Fraudulent lenders may offer loans with unrealistic terms or promise guaranteed approval, even to individuals with bad credit. They often charge upfront fees and then disappear without providing the promised funds.
If you encounter a credit scam or identity theft:
To maintain a healthy financial profile, it’s crucial to regularly check your credit report. You can obtain a free annual credit report from each of the three major credit reporting agencies: Equifax, Experian, and Illion. Visit their official websites and follow their user-friendly instructions to request these reports.
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You’ll need to provide personal information for identity verification. Once you receive the reports, meticulously review them for discrepancies, errors, or any suspicious activities, like unfamiliar accounts or inquiries. Continuously monitoring your credit reports throughout the year is vital, even though you’re entitled to one free report annually. To avoid missing this opportunity, consider setting calendar reminders for future requests.
While reviewing your credit reports, pay close attention to personal information, including your name, address, and date of birth, ensuring they are accurate. Examine your credit accounts, such as credit cards and loans, for correct balances, payment histories, and credit limits. Be on the lookout for any unfamiliar accounts that might indicate identity theft or errors. Verify the list of inquiries made on your credit report, especially inquiries from sources you haven’t contacted.
If you discover errors or inaccuracies, take action promptly by following the credit reporting agency’s procedures for disputing these issues and providing any necessary supporting documentation. Afterwards, stay engaged by following up to ensure that the corrections are made accurately and promptly.
A credit freeze is a security measure that you can place on your credit report to prevent anyone from accessing it without your permission. This means that lenders will not be able to see your credit report and open new accounts in your name without your consent.
To place a credit freeze, you will need to provide your personal information, such as your name, address, date of birth, and driver’s license number. Once you have placed a credit freeze, you will need to provide a PIN to any lender that you want to access your credit report. This PIN will be provided to you by the credit bureau when you place the freeze.
Credit freezes can be a very effective way to protect yourself from identity theft and credit fraud. However, they can also make it more difficult to apply for new credit. If you want to apply for new credit, you must temporarily request that your credit freeze be lifted. You can do this by contacting the credit bureau that placed the freeze.
A fraud alert in Australia is a notice placed on your credit report to warn lenders that you may be a victim of identity theft. It tells lenders to be careful before opening any new accounts in your name.
To place a fraud alert, you will need to provide your personal information, such as your name, address, date of birth, and driver’s license number. Once you have placed a fraud alert, lenders will be required to contact you before opening any new accounts in your name. This gives you a chance to verify the request and prevent any fraudulent accounts from being opened.
A fraud alert will last for 12 months. After 12 months, you can renew the fraud alert or remove it altogether.
Note: If you are concerned about identity theft or credit fraud, you may want to consider placing a credit freeze on your credit reports. A credit freeze is the most effective way to prevent new accounts from being opened in your name without your permission.
However, it is important to note that a credit freeze will make it more difficult to apply for new credit. If you are planning to apply for new credit shortly, you will need to temporarily lift your credit freeze. You can do this by contacting the credit bureaus.
Several Australian laws protect consumers from credit scams. These include:
If you become a victim of a credit scam in Australia, you have several options for seeking legal assistance and support:
There are several resources and agencies in Australia that can provide guidance and information about credit scams. These include:
Safeguarding one’s credit scores and personal information is paramount in today’s digital age. Credit scores hold substantial weight in various aspects of life, influencing decisions made by lenders, landlords, and even employers. However, the rise of credit scams and fraudulent practices necessitates a proactive approach towards protection.
By staying informed, vigilant, and leveraging legal protections, individuals can significantly reduce the likelihood of falling victim to credit fraud. It is imperative to not only be well-informed about credit scams but also to empower oneself with the knowledge and resources needed to navigate this complex landscape securely.
While we at Tippla will always do our best to provide you with the information you need to financially thrive, it’s important to note that we’re not debt counsellors, nor do we provide financial advice. Be sure to speak to your financial services professional before making any decisions.
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