Housing Counselor Certification (HUD) Practice Exam

After discovering identity theft, what should a counselor recommend a client do first?

1. Change all passwords

2. File an identity theft report

3. Contact creditors

4. Monitor credit reports

The correct answer is: File an identity theft report

Filing an identity theft report is the most essential first step a counselor should recommend after a client discovers they have been a victim of identity theft. This report serves as a formal declaration of the crime and is crucial for several reasons. When a client files an identity theft report with the Federal Trade Commission (FTC) and/or local law enforcement, it provides them with a legal record that can be used to help dispute fraudulent transactions and accounts that may have been opened in their name. Additionally, having this report can aid in securing other protections, such as placing a fraud alert on their credit reports or requesting a credit freeze, which prevents creditors from accessing the client’s credit report without permission. This report is also vital in dealing with creditors, as it serves as proof of the client's claim, thus empowering them to take action to resolve fraudulent charges. As such, while other actions like changing passwords, contacting creditors, and monitoring credit reports are important parts of the overall recovery process, establishing a formal identity theft report is the foundational step that affects all subsequent actions.