What Is Identity Theft and How Can You Prevent It?

We've all wished we were someone else on a bad day, but genuinely stealing someone's identity for financial gain takes the matter to a whole new (criminal) level. Identity theft is a widespread problem, and nobody is 100% safe from it.

What Is Identity Theft?

Identity theft is a felony that occurs whenever someone is using your personal information without your permission with the intent to commit fraud. Once this person gets hold of your Social Security number, address, or date of birth, they can apply for credit, medical service, or even use your name with the police to get out of trouble.

As a result, you can end up with a ruined credit score, which you worked so hard on improving or maintaining. You can get into serious trouble with the police or end up buried in debt for purchases you did not make or approve of.

The most troubling and dangerous theft of identity occurs when someone steals your medical records. If these are tampered with, the actual patient could die because doctors rely on false information. Fortunately, in most cases, the risks are not that severe - but they do take a long time to sort out.

The Federal Trade Commission is the government body responsible for collecting identity theft complaints, and the numbers published in their Consumer Sentinel Network Data Book are highly problematic. A 45% year-over-year increase in identity thefts signifies how urgent it is to understand and learn how to prevent identity theft.

Types of Identity Theft

So, what is considered identity theft, and what isn’t? There are several ways scammers can exploit your personal information. In some cases, they only need your first and last name. Other types require your address or Social Security number. Here we’ll go over the most common identity theft types.

Credit Identity Theft

Credit identity theft happens when a criminal uses your Social Security number to apply for a new line of credit. It could create many difficult situations for you, harm your credit score, and leave you with debts you would be obliged to pay.

The chances are you already know someone who became a victim of this identity theft - it’s among the most common types and the main reason people are advised to investigate and dispute every change in their credit score they don’t recognize.

Child Identity Theft

Child identity theft occurs when fraudsters steal a child's identity and apply for credit in the child’s name. The major problem is that children's identity is the easiest to steal, and it’s one of the most challenging thefts to uncover if you are not proactive about it. Unfortunately, this kind of theft is usually discovered only when a child grows into a young adult and wants to open their first credit line.

The safest way to prevent identity theft is to open an account for your child and freeze your child's credit with the three credit bureaus in advance.

Synthetic Identity Theft

This type of theft is the easiest one to pull off. It’s based on patching up random aspects of identity, such as a random name with a non-existing Social Security number, thus creating a synthetic identity to be used for malicious purposes. Fraudsters typically utilize a non-assigned Social Security number for these purposes. The primary victims of this type of identity theft are creditors.

Medical Identity Theft

What is medical identity theft, and how can anyone benefit from it? Well, this is the most dangerous type of identity theft, and it has seen a significant rise in the last year. While most of it is what you could call “Robin Hood” theft, where family and friends offer their identity to a family member whose insurance doesn't cover a specific procedure, in some instances, it can be a stranger using someone's Social Security number.

Why is this so dangerous? Serious, even fatal errors can occur due to incorrect information doctors rely on - wrong blood type, for example. Reporting any discrepancies in your insurance reports is essential, as these could be an early sign that your medical identity has been stolen.

Taxpayer Identity Theft

The key thing to know about identity theft is that people behind them are after free money. The same goes for taxpayer identity theft. Impostors can use your Social Security number to file for tax returns and steal tax credit or tax refunds. Filing your paperwork early on is usually the safest bet to stay protected in this scenario.

Criminal Identity Theft

A fake ID is necessary to carry out this type of identity theft, and it usually occurs when a person gets in trouble with the police and uses someone else's identity to get out of it. This one might not be so obvious: You usually notice it once it’s too late and the damage has already been done.

Account Takeover

What is the most common form of identity theft? Account takeover, without a doubt. When the tech-savvy scammers get hold of your passwords - either by physically stealing one of your devices or hacking into a database - taking over your account becomes easy as pie. Once they obtain access to your accounts, all they have to do is log you out and change passwords.

If your passwords don't seem to work anymore, it’s a warning sign that someone might have hacked your account. Emails about unauthorized access attempts are also a reliable signal, but only if they come from the relevant authority. Otherwise, they are nothing more than a phishing or spoofing attempt.

So, how to protect yourself from this identity theft? If one of these emails appears in your inbox, the safest course of action is to give your bank a call and check whether there was a genuine attempt to access your account, and if there was, consult them on the measures you should take.

How Does Identity Theft Happen?

Fraudsters keep finding new creative ways to steal identities, but most identity thefts happen because a person was not careful enough about protecting their information.

However, if you have typed in “What is identity theft?” in the search box and your query led you to this article, you are probably already aware of the potential risks and are looking for a way to enhance your data protection.

A proactive attitude is the best approach because your personal information is not protected by default. It’s in the mail you receive, in the paperwork you toss in the trash every day, and in myriad places on the internet. To ensure it stays safe, adopting some daily preventive measures is a sine qua non.

What Is the Best Way To Protect Yourself Against Identity Theft?

Here are some tips you can implement to minimize the risk of identity theft.

Freeze or Lock Your Credit

Freezing your credit with major credit bureaus is free, and you can always unfreeze it if you need to apply for a new line of credit. Equifax, TransUnion, and Experian additionally offer the service of locking your credit. Thawing your credit can take up to three business days, but lifting a lock is a matter of seconds.

Freezing or locking your credit is one of the best identity theft protection tips, as it prevents third parties from accessing your credit file. This is important because the credit bureaus have no means of connecting a Social Security number to a name or face when someone shows up to open an account.

Keep Your Social Security Number Safe

This is another important habit to adopt. Carrying your Social Security card around or showing it to anyone at all times might not be the best idea, as it invites Social Security number theft.

What is social security identity theft anyway? It’s a type of identity theft that requires your Social Security number. So, if anyone asks for it, double-check if they are authorized to do so. Don’t hesitate to ask why they need it and whether they could use some other type of identification instead.

Last but not least, don’t forget that your Social Security number can be found in plenty of documents - because impostors won’t. Ensuring you are the only one who can access this kind of paperwork is a crucial step - invest in a safe, a paper shredder, or a secure mailbox.

Learn To Recognize Phishing and Spoofing

Phishing and spoofing are among the easiest ways for scammers to obtain the information needed to commit personal identity theft. They usually make phone calls or send emails that appear as if they come from trusted sources, such as banks or insurance companies.

Be wary of emails from Nigerian princes and similar messages. If an offer sounds too good to be true, it usually is just that - false. These emails often contain malware that can harm your computer, which is why you shouldn’t even open them. Simply delete them straight away.

Try to think from their perspective: What information is needed for identity theft? It could be your Social Security number, date of birth, address, and so forth. Avoid giving this kind of personal information over the phone.

Use Strong Passwords

Passwords are crucial to ensure the security of your accounts. Your password shouldn't be “password,” your date of birth, or any other word that can be easily guessed. Never use the same password on multiple accounts. A password manager is an ideal tool to generate strong and unique passwords that will keep your accounts protected and prevent identity theft.

If the application offers two-factor authentication, set it up. It might seem like a hassle, but it’s actually one of the best ways to keep yourself safe from identity theft. Always double-check you are using dedicated and verified apps, especially for your bank accounts. There is plenty of malware in app stores posing as regular, verified software.

Monitor Your Accounts Regularly

If your bank offers the service of sending you texts whenever you make a transaction, use it. It’s the easiest way to stay informed about what is happening with your accounts. This way, you'll find out about identity theft the very instant the impostors use your information to make their first transaction. From there, you can quickly act on it and prevent any further misuse.

Regularly checking your reports is a must. The good news is that, until April 2022, you can access a free credit report every week - a drastic improvement from the yearly option available up until now. And if you don’t have time for weekly checks, consider outsourcing the task to a company that performs credit monitoring for you.

It's essential to know in advance what to do when identity theft is suspected.

If you find entries from organizations you haven't dealt with at all on your credit reports, contact them immediately. Record these conversations - or at least jot down all the actions you have taken, who you have spoken to, the time and date of contacting them. Save any emails and letters you get, too, in case you need to dispute something with the relevant authority.

Monitoring stays vital for your financial and medical statements’ security. Being proactive is the best identity theft protection. Familiarize yourself with every aspect of your insurance, bank, and credit reports. If there are statements on any of those you don't understand or remember, investigate the matter as soon as possible and report it.

Identity Theft Prevention Companies

Another option is to get help. There are numerous identity theft prevention companies on the market, so choosing the right one can take some time, but it pays off in the long run. There is no one-size-fits-all answer to the question “What is the best identity theft protection company?” as most of them offer similar features, such as monitoring your bank and credit accounts and your Social Security records. Some of them offer VPNs or family packages.

Do your due diligence when picking the service that protects against identity theft to keep your identity safe and read the reviews users left about them.

What To Do if You Fall Victim to Identity Theft

If you notice something strange happening, either with your accounts or on one of your reports, the crucial thing is to act quickly. Reporting the issue should be done immediately, before the scammers drain your accounts or damage your credit score.

It is also essential to know how to report identity theft, so let's break that down, too.

If you believe you're a victim of an account takeover, including debit or credit card fraud, the first step is to contact your bank and let them know. From there, the bank is held responsible for investigating further and reporting the case to the police.

Missing mail needs to be reported, too. If you believe someone is stealing your mail to get to your personal information, or if you notice it stopped arriving altogether in your mailbox, contact the United States Postal Service immediately to prevent becoming a victim of identity theft.

If your personal documents, such as passport, checkbooks, or driver's license, get lost or stolen, it is essential to report this to a relevant authority. In most cases, that would be the police. Stolen driver’s licenses should be reported to the Department of Motor Vehicles, while passports are reported to the appropriate US Department of State office. If you are not sure which authority is applicable in a particular scenario, contact the Federal Trade Commission for advice on the matter.