Identity Theft: Understanding the Risks and Safeguarding Your Information
Identity theft is a form of fraud where someone unlawfully uses your personal information to impersonate you. While financial gain is often the motive, identity theft takes many forms, and understanding the risks and how to protect yourself is essential.
If you become a victim of identity theft, you are entitled to a 90-day fraud alert from credit bureaus. In 2022, the Federal Trade Commission (FTC) received 1.1 million reports of identity theft, though the true number is likely even higher. As more personal information is stored online, the risk of identity theft increases.
Fortunately, there are proactive steps you can take to reduce your risk of identity theft. These include implementing strong security habits and using identity theft protection services. While comprehensive protection services exist, even a basic understanding of the vulnerabilities and potential risks can go a long way toward safeguarding your identity. This article provides a comprehensive overview of identity theft including what it is, the different types, how to prevent it, and the actions to take if you believe you’ve been victimized.
What is Identity Theft?
Identity theft occurs when an individual steals another person’s information for financial advantage or to assume that person’s identity. The Identity Theft and Assumption Deterrence Act of 1998 made identity theft a federal crime, though most cases are handled at the state level. Federal courts generally get involved when large sums of money are stolen or when a fraudster steals multiple identities.
Because perpetrators act under the victim’s identity, the victim can be held accountable for the perpetrator’s actions. Paige Hanson, a cyber safety consultant and formerly the chief of cyber safety education at NortonLifeLock, points out the unfortunate reality that identity theft victims are often viewed as guilty and must prove their innocence.
Types of Identity Theft
Identity theft can be committed using various types of information, leading to different outcomes. Here are some of the most common types of identity theft:
Financial Identity Theft
This is the most prevalent form of identity theft. The fraudster uses your information for financial gain. For example, this can involve using your credit card information to make unauthorized purchases online or in person. Identity theft can also extend to using your Social Security number to open new lines of credit in your name. This not only damages your financial health but also negatively impacts your credit score.
Hanson advises using credit cards instead of debit cards for purchases because of the added protections credit cards offer. She explains that if a fraudster spends from your debit card account, you may be left without money until the bank reimburses you, which can take several business days.
Medical Identity Theft
In medical identity theft, a fraudster uses your medical insurance information to receive reimbursement for their medical expenses. This can involve an insurance holder providing their information to someone else to avoid paying for their medical expenses. Additionally, medical providers can commit fraud by claiming to have performed procedures that never happened to gain reimbursement.
Medical identity theft can damage your credit and have more severe consequences if the fraudster’s actions create medical records under your name. This can lead to inaccurate medical records and complications during medical procedures.
Criminal Identity Theft
In criminal identity theft, the perpetrator commits a crime (such as receiving a speeding ticket) and gives someone else’s information (like a driver’s license) instead of their own. The victim then becomes legally responsible for the perpetrator’s actions.
Child Identity Theft
Children are attractive targets for fraudsters because they have blank credit histories. When a fraudster attempts to open a credit line in your name in a different area, this might raise red flags because of a history. However, in situations like child identity theft, the child has no credit history, which means that there are no prior circumstances to flag any suspicious activity.
These cases often involve familiar fraud, where the victim knows the fraudster personally, usually a friend or family member. As Hanson notes, the young adult may not want to press charges against someone within their familiar circle, which can result in poor credit.
Synthetic Identity Fraud
Synthetic identity theft is a relatively new form of fraud involving the creation of a false identity using fragments of other people’s information. This is often difficult to detect because the fraudulent identity doesn’t actually exist. A fraudster might start by stealing a Social Security number and add fake information like a fake name and address to create a complete fraudulent profile. Fraudsters might use this identity to build credit, take out a loan, then disappear.
Although the identity is a mix of information from different people, Hanson says that the owner of the Social Security number is usually held accountable. However, it may not necessarily appear on their credit report because not all of the other information matches.
How to Prevent Identity Theft
Awareness and vigilance are the first steps toward reducing your risk of identity theft. However, breaches and leaks are often beyond our control. Fraudsters can get your information through online retailer data breaches or leaks from insurance companies. Even Equifax, one of the major credit reporting bureaus, was targeted in a data breach in 2017. However, these are some reliable ways to limit damage to your identity.
Protecting Your Personal Information
It is vital to diligently guard your personal information and online accounts. This means following good security practices, like using different passwords, to prevent credential stuffing. Also, you should dispose of documents with sensitive personal or financial information by shredding them.
Use Secure Passwords
Create passwords difficult to guess. Avoid passwords based on personal information such as your last name, place of work, or birthdate. Consider text verification along with your password to increase the security of your financial accounts.
Sign up for ID Theft Protection or Credit Monitoring
Personal information leaks are often out of your control. Although keeping up with security is crucial, the best course of action is to monitor your accounts. Consider obtaining identity theft protection that monitors your information and alerts you to detect potential fraud. You can also sign up for a credit monitoring service, which can alert you to changes on your credit report.
Regularly Check Your Credit Report
If you don’t enroll in ID theft protection, periodically check your credit report to see if there are any unauthorized credit lines. You can get a free credit report from each of the three credit bureaus at AnnualCreditReport.com every 12 months.
Preventing Child Identity Theft
To prevent child identity theft, you can open a line of credit in your child’s name and freeze their credit while they are under 16. Known as a security freeze, this restricts access to your child’s credit history. Both your child’s identity and your identity must be verified with all three credit bureaus, confirming your legal guardianship.
What to Do If You’re the Victim of Identity Theft
If you notice credit fluctuations, unsolicited collection notices, or debt you didn’t incur, this could indicate that your identity has been stolen. Though this can be a traumatic experience, you have rights as an identity theft victim. Once you realize your identity has been stolen, you need to take several steps.
Report the Fraud
First, notify the companies that are involved in the identity theft. For most cases, such as credit card fraud, you can report the fraud and get a new card. If the fraud happens within a set time frame, typically 60-90 days, you are not held responsible. In most states, you are not responsible for new lines of credit due to fraudulent activity. You also have the right to challenge debt collectors if they contact you about repaying debt you didn’t incur.
Report to the FTC
After notifying the related companies, file a report with the FTC. While you can report identity theft over the phone at 877-438-4338, you will only obtain an identity theft report if you make your report online. The report can be helpful documentation for reclaiming your identity.
Report to Credit Bureaus
Report the identity theft to one of the three credit bureaus — Experian, Equifax, or TransUnion. The bureau you report to is required to notify the other two. When you contact your credit bureaus, you are entitled to an initial 90-day fraud alert. This requires creditors to take steps to verify the identity of someone applying for credit under your name. They must also provide a free credit report, a summary of your rights, and the fraud alert.
Contact the credit bureaus:
- Equifax — Call 800-525-6285 or add a fraud alert through your online Equifax account
- Experian — Call 888-397-3742 or add a fraud alert through Experian’s Fraud Alert Hub
- TransUnion — Call 800-680-7289 or through TransUnion’s online account
According to Hanson, it is difficult for fraudsters to use your Social Security number. She says that fraudsters often move on to the next Social Security number because it is more difficult for them to freely use it.
Contact Local Law Enforcement
In certain circumstances, you should contact your local law enforcement agent, such as knowing the person who stole your identity. Report the incident to law enforcement if the fraudster used your information. Certain companies may require a police report when reporting fraud.
Strengthen Your Digital Security
If you were not signed up for identity theft protection before the theft, do so afterward because victims are often targeted again. There may be extenuating circumstances, like constant use of your Social Security number to steal your identity, where you may be eligible for a new one. You can apply for a new one online through the Social Security Administration.
Jennifer Streaks
Jennifer Streaks is a Personal Finance Expert and Journalist who writes about credit and all things money for Business Insider. She offers expert advice on budgeting, saving and growing wealth.
