Identity theft is when thieves use personal information, such as your Social Security number, to open bank or credit card accounts in your name. The effects can be devastating to your credit, but you can recover from this crime.

The first thing to do is to find out what kind of ID theft has happened. The diagnosis is simple -- it’s either account takeover or new account fraud (also know as true name fraud). There are many ways to control the damage. Victims can enact a security freeze while they repair accounts. They may even consider purchasing identity protection from a financial institution to prevent future harm.

If you have been affected by ID theft, staying organized and following these steps can lead to a swift recovery.

ID THEFT RECOVERY CHECKLIST

Don’t Panic. The most common type and the easiest to detect is account takeover, when thieves gain access to your accounts and steal funds or go on a shopping spree. You can usually spot the theft while checking your balances or reading your bank statements.

The other kind of account fraud is when criminals use your data to open new credit accounts or take out loans in your name. Because the bills usually go to a false address, you may not know anything is amiss until you check your credit report. In the worst case you may not know there is any trouble until a collection agency contacts you.

Take Notes. Write down the details of all fraudulent transactions so you can report them to the authorities. If a debt collector contacts you, get their name, number, and the details of the complaint against you. Get all your credit and identity information together and be prepared to make a lot of phone calls.This helps to create a record of your response to the theft that will help you to prove your claims are legitimate.

Freeze Your Files. As of November 1, 2007, all three credit bureaus now offer a powerful identity protection measure known as a security freeze. If you are the victim of identity theft, this service is free.

The freeze puts a lock on all your credit files at each of the three credit bureaus, so that identity thieves cannot open accounts in your name. When you want to open a new account or take out a loan or mortgage, you can bypass the freeze by using a private PIN number.

While your credit rating won't be affected by the freeze, bureaus charge non-victims $10 to place and lift the freeze. Certain states have pre-existing laws require the bureaus to provide the freeze on more favorable terms. Check the Consumers Union ID theft website for information on your state: www.financialprivacynow.org.

Do the Paperwork. File an official affidavit with the FTC about the theft, for that go to http://www.ftc.gov/bcp/edu/microsites/idtheft/.

Immediately fill out the report as soon send copies to all banks and creditors who had transactions with the ID thieves; without it, you may be liable for the stolen money or goods.

This helps law enforcement officials track ID theft, and also extends the paper trail that identifies you as a victim.

File a Police Report. Contact your local precinct or, if your credit and/or identity cards were stolen while you were away from home, alert the officials where the theft occurred.

Pick Up the Phone. Contact companies and lenders who keep the information you suspect to be compromised. Call the fraud department of these institutions directly, ask (and take note of) whom you’re speaking with, report the fraud, and close your account. Send the request in writing and by certified mail, return receipt requested, so that it becomes a matter of record what your creditors know and when they received the information.

Remain Vigilant. Although a security freeze will protect you from new account fraud, it's possible that identity thieves could do more damage with the data they already have. Read more about how to prevent ID theft here.

THE BOTTOM LINE
Respond to an incident of identity theft quickly and aggressively. The government and lenders are on your side, but it’s up to you to do the legwork to set your records straight. With your credit rating on the line, it’s imperative that you document the theft and put a security freeze in place for future protection.