Grandma opened a credit card in my name

NEW YORK (CNNMoney.com) -- Question 1. My grandmother opened a credit card account in my name without my knowledge, did not pay it and now they are coming after me. She is 71 years old. What shall I do? -- Jackson, Greensboro, N.C.

Your case is all too common. "Somewhere between three and five out of every 10 cases of identity theft is committed by a family member or friend who has access to personal information," said John Ulzheimer, president of consumer education for Credit.com.

But when a grandparent uses his or her own grandchild for credit card fraud, the risk of prosecution is lower because of family ties. It's not easy to turn in grandma. But you can.

Decide whether or not to contact law enforcement. "This of course may involve turning in one's grandmother. Depending on the relationship, this may 'cost' more than the actual debt in more ways than one," says Robert Siciliano, McAfee consultant and identity theft expert.

File a police report citing identity theft. Evidence can be signatures not matching or charges made when the victim couldn't have possibly made them.

Once a police report is filed, the process of mitigating "new account" fraud begins. It is more important to prove that the victim did not make the charges than to prove who made the charges.

But remember, if you fail to file a police report, you will appear responsible for the charges.

Notify your credit card issuer to shut the card down so that the fraudulent charges cannot continue. The credit card company will request that you send a signed affidavit and a copy of the police report.

You need to take steps to document the questionable purchases. Creditors expect to get paid. By proving that you did not make the charges the debt can be forgiven.

Discover Card and other issuers will work with the merchants, where the alleged fraudulent activity occurred, to request receipt details. Once all of the necessary information is in the hands of the card company, they review the evidence and make a determination.

The credit card company may have already sold off your debt to a collection agency whose sole purpose is to collect money from you. To stop their pestering, you will also need to send the collection agency an affidavit and copy of the police report.

The collection agency's next steps would be to indicate that the account is in dispute, inform the credit bureaus of this and begin their investigation.

However, since they process so many collections, they may not respond to your notification of fraud and you may choose to file a Fair Debt Collections Protection Act (FDCPA) lawsuit to stop their actions, according to Ulzheimer.

The fact that you have been late in your payments, however fraudulent the charges were, has been reported to the three credit bureaus. They are housing, maintaining and possibly disclosing incorrect information about you.

You will want to add a fraud alert to your credit report and have the erroneous information purged from your file. Once again, you will be asked to furnish an affidavit and a copy of a police report.

Going forward, it's a good idea to be sure to review your credit report and report any unfamiliar activity, as well as regularly monitor account activity online.