What is Identity Theft?
Identity theft is a pervasive crime where someone steals your personal information to impersonate you, often for financial gain. While it may seem like a distant threat, the prevalence of identity theft is alarming. The Federal Trade Commission (FTC) received over 1.1 million reports of identity theft in 2022, and the actual number is likely far higher. The increasing amount of personal information online contributes to this growing risk.
This article will explain everything you need to know about identity theft, including:
- What identity theft is
- Types of identity theft
- How to prevent identity theft
- What to do if you are a victim
Identity theft occurs when someone fraudulently uses your personal data, such as your name, Social Security number, or financial account details, for financial gain or to assume your identity. The Identity Theft and Assumption Deterrence Act of 1998 made identity theft a federal crime, although most cases are handled at the state level. Paige Hanson, a cyber safety consultant and former chief of cyber safety education at NortonLifeLock, notes that victims of identity theft often find themselves in the difficult position of having to prove their innocence due to the fraudster’s actions being carried out under the victim’s identity.
Types of Identity Theft
Identity theft can take several forms, each with different consequences.
Financial Identity Theft
The most common type of identity theft involves a fraudster using your information for financial gain. This can range from using your credit card for online or in-person purchases to opening new lines of credit in your name using your Social Security number. This not only affects your finances but also damages your credit score.
Hanson recommends using a credit card instead of a debit card for purchases, because credit cards offer more protection. She states, “If a fraudster went on a spending spree out of your debit card account and spent whatever the balance was, you’re left without any money until the bank reimburses you, which can be up to, you know, five to 10 business days.”
Medical Identity Theft
In medical identity theft, a fraudster uses your medical insurance information to obtain medical services and claim reimbursement for their expenses. Alternatively, an insurance holder might give their information to someone else to avoid paying for their medical expenses. Medical providers can also commit fraud by billing for procedures that never happened.
Medical identity theft can affect your credit and have more serious consequences. This type of theft can lead to inaccurate medical records, which can create complications during medical procedures.
Criminal Identity Theft
Criminal identity theft occurs when a perpetrator commits a crime, such as a traffic violation, and provides someone else’s information, like a driver’s license, to avoid legal responsibility for their actions.
Child Identity Theft
Children are vulnerable targets for identity theft because they lack a credit history. Fraudsters can exploit this by opening new lines of credit in a child’s name, which often goes unnoticed due to the absence of a credit history.
These cases often involve familiar fraud, where the fraudster is known to the victim, such as a friend or family member. Hanson notes, “In those cases, the young adult doesn’t necessarily want to press charges against their parents or aunts or uncles, somebody within their familiar circle. And so they’re left with poor credit.”
Synthetic Identity Fraud
Synthetic identity fraud involves creating a fake identity using bits and pieces of other people’s information, making it difficult to detect since the identity doesn’t exist. A fraudster might steal a Social Security number and add false information, such as a fake name and address. They then use this fraudulent identity to build credit, take out loans, and disappear.
According to Hanson, the owner of the Social Security number is usually held accountable, though the fraudulent activity might not appear on their credit report because the other information doesn’t match.
How to Prevent Identity Theft
While personal information breaches are often beyond our direct control, there are preventive measures that can minimize the risk or damage from identity theft.
Protecting Your Personal Information
- Practice Good Security Habits: Create complex, unique passwords and vary them across accounts. This prevents credential stuffing, where a hacker uses stolen credentials on multiple sites. Consider using SMS text verification for additional security.
- Dispose of Documents Securely: Shred documents with sensitive information or use a permanent marker to obliterate important personal details.
Sign Up for ID Theft Protection or Credit Monitoring
An identity theft protection service monitors your personal information for signs of fraudulent activity and alerts you if it detects something suspicious. You can also regularly check your credit report.
Regularly Check Your Credit Report
You are entitled to a free credit report from each of the three credit bureaus every 12 months from AnnualCreditReport.com. Credit monitoring services also offer alerts about any changes to your credit report.
Preventing Child Identity Theft
To protect your child’s identity, consider freezing their credit. You can establish a line of credit in your child’s name and then freeze it until they turn 16. This requires verifying both identities with each of the three credit bureaus.
What to Do If You’re the Victim of Identity Theft
If you suspect you’re a victim of identity theft, take these steps:
Report the Fraud to Relevant Companies
Notify the companies directly involved in the identity theft. For instance, if your credit card information was stolen, report it, dispute any fraudulent charges, and request a replacement card. You are typically not held responsible if you report the fraud within the required time frame, usually 60-90 days.
Report Fraud to the FTC
File a report with the Federal Trade Commission (FTC). You can report identity theft by calling 877-438-4338, but you’ll only receive an identity theft report if you file online. The identity theft report provides useful documentation when trying to reclaim your identity.
Report Fraud to Credit Bureaus
Contact one of the three major credit bureaus—Experian, Equifax, or TransUnion—to report the identity theft. The bureau you contact is legally obligated to notify the other two.
When you contact the credit bureaus, you are entitled to an initial 90-day fraud alert, which means creditors must take reasonable steps to verify the identity of anyone applying for credit in your name. They also must provide you with a free credit report.
- Equifax: Call 800-525-6285 or add a fraud alert online through your Equifax account.
- Experian: Call 888-397-3742 or add a fraud alert through Experian’s Fraud Alert Hub.
- TransUnion: Add a fraud alert by calling 800-680-7289 or through TransUnion’s online account.
Go to Local Law Enforcement
Report the incident to your local law enforcement, especially if you know the person who stole your identity. Also, report the incident if the fraudster used your information to commit a crime. Some companies may require a police report when reporting fraud.
Strengthen Your Digital Security
After an identity theft incident, enrolling in identity theft protection is recommended, as victims are often targeted again. In certain situations, such as when your life is threatened or your Social Security number is consistently exploited, you may be eligible for a new Social Security number. You can apply online through the Social Security Administration.
Frequently Asked Questions about Identity Theft
What are the three types of identity theft?
According to the FTC, the most common types are credit card fraud, bank fraud, and fraud involving leases and loans.
How do thieves steal identities?
Thieves use methods such as phishing, credential stuffing, data breaches, and theft of personal information.
What should you do if someone has stolen your identity?
Take these steps:
- Report the instance to the relevant authorities.
- Contact your bank.
- Recover your identity, and recuperate any monetary damage.
- Place fraud alerts on your credit reports.
Conclusion
Identity theft is a serious threat, but you can take steps to protect yourself. By understanding the risks, implementing preventative measures, and knowing what to do if you become a victim, you can reduce your exposure to this crime.
Jennifer Streaks, Senior Personal Finance Reporter and Spokesperson
