In cases of identity theft, request 'letter of clearance'


A year ago, someone fraudulently applied for credit in my name. I was tipped off by several diligent credit card companies. I promptly placed fraud alerts with all three credit bureaus and notified the local police department and Social Security office.

One less-than-diligent company, however, allowed the fraudster to open an account after I had done all these things. I followed the company's instructions, sending it a notarized affidavit of fraud. The account has disappeared from my credit reports, which I review regularly, but I'm getting calls from a collection agency about it. Is there anything else I should have done?

You're seeing for yourself why people tear their hair out over identity theft. You didn't do anything wrong, and yet you're still battling to clear your name.

The only thing that might have helped you would have been to demand that the errant credit card company write a letter to you acknowledging that the account was not yours, said Jay Foley, director of consumer and victim services for the Identity Theft Resource Center. You should have requested this "letter of clearance" when you sent in the fraud affidavit, Foley said.

You should still ask for this letter and send it to the collection agency. Send it certified mail, return receipt requested, and keep a copy for your files.

Any time you deal with a serious credit problem, make sure you communicate in writing (rather than by phone), keep a copy of all documentation and use certified mail with return receipts.

Foley said such precautions ensure that the creditor knows you are serious about clearing up the problem. The return receipt makes it tougher for creditors to deny having received your documentation, he added.

For more information on identity theft, check the resource center's Web site at or the Federal Trade Commission's site on the subject,

What do you think of paying off a mortgage early? I recently mentioned to a friend, who appears to be quite wealthy, that we were on track to have our mortgage paid off in three years. Our idea is that when our kids are ready for college in 2005, we would switch from a monthly mortgage payment to a monthly tuition payment.

We have been saving for college since they were born, but stock market losses make us reluctant to rely on that alone for their education. This friend, however, said we shouldn't pay off the house because we would lose the "enormous" tax benefit of writing off the interest payments. I respect her opinion because she appears to be doing quite well and is a tax lawyer as well as a real estate agent. But we would like the security of a paid-off home.

Apologies to your friend, but keeping a mortgage just for the tax deduction is pretty silly.

Think about it. Would you pay someone a dollar for the privilege of getting back 27 cents? That's in essence what you're doing when you pay a dollar of interest to get a tax break when you're in the 27 percent federal tax bracket.

The payoff is higher when you're wealthy, because you're in a higher bracket. But you'll never get a dollar's worth of tax benefit for a dollar spent on interest.

Because you're near the end of your loan, most of the payments you're making probably are principal. You don't get any tax break on that portion of your payment.

The better reason for not paying off a mortgage early is that you typically can get a better return for your money elsewhere if you're investing for the long term. If security is important to you, however, and you're already investing for other goals, such as retirement, then there's nothing wrong with your plan.

Liz Pulliam Weston is a columnist for the Los Angeles Times, a Tribune Publishing newspaper.

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