If you provide your credit card number, contact information or Social Security number online or in person, you’re at risk for identity theft. Since that’s almost everyone over the age of 18, chances are that the risk applies to you. Identity theft happens when someone uses your information to make purchases, set up accounts, steal from you or pretend to be you, but there are things you can do to reduce your risk.
What Is Identity Theft?
Identity theft is a type of fraud whereby someone uses someone else’s information without permission. This can vary from your credit card number being used for purchases to someone taking out a mortgage or being arrested under your name. Identity thieves thrive in situations where minimal actions are taken to fully verify someone’s identity.
Anyone can become a victim of identity theft, but there are things that can increase risk. It’s especially important to protect yourself against large-scale identity theft, which can impact your credit score for years. Lesser forms of identity theft, such as having your credit card number stolen and used to make purchases, can be quickly remedied as long as you’re monitoring your bank accounts.
Risk of Identity Theft
It can be tough to avoid identity theft, although there are things you can do to reduce your risk. If you make payments online, submit forms for medical care or as part of a credit application or otherwise have your information stored on a server somewhere, you could have your data stolen and used for fraudulent activity.
Currently, the most common identity theft type is government documents fraud, which occurs when someone applies for benefits under a stolen name. Cybersecurity risks are also a top business threat, with organizations reporting increased instances of cybercrimes like account takeover fraud and ransomware attacks.
Identity theft happens when someone uses your information to make purchases, set up accounts, steal from you, or pretend to be you, but there are things you can do to reduce your risk.
Types of Identity Theft
Identity theft rears its ugly head in a variety of ways. Here are some of the most common types of identity theft.
- Government documentation scams: This type of scam thrived during the pandemic due in part to the stimulus payments being circulated. But scammers have also used stolen information to claim unemployment benefits, tax refunds and Social Security benefits.
- Credit card data theft: Credit card theft can happen when skimmers are installed at a point-of-sale system, where a card’s information is electronically captured. But numbers can also be stolen and manufactured into new cards or used for online purchases, meaning that credit card fraud can impact you if you use a debit or credit card to make purchases anywhere.
- Credential theft: This type of fraud happens when scammers access your username and password and use the information. In the workplace, this can provide a backdoor into your entire company’s network, leading to more widespread data theft.
- Account takeover fraud: With account takeovers, scammers seize your account, either by using stolen credentials or through a weakness in security protocols. This can lead to you being locked out of your financial, messaging or social media accounts.
- Ransomware attacks: Ransomware is a growing problem faced both by businesses and personal device owners. With ransomware, software encrypts the files on a device, making them inaccessible. Criminals typically demand payment to unlock the files, but paying ransoms is not recommended and doesn’t guarantee access to files.
- Credit application fraud: With application fraud, criminals use stolen information to apply for new accounts. This could be a mortgage, credit card, personal loan or other type of financing.
Effects of Identity Theft
If you’ve ever had your credit card stolen, you know that it can be a massive inconvenience. You have to contact your lender and have a new card issued, which means cutting up the old card. The biggest inconvenience is often shifting all auto-payments to the new card, which can be time-consuming and tedious if you take full advantage of autopay.
But the effects of identity theft can be long-lasting. If your sensitive information is used to apply for fraudulent loans, you could find negative entries in your credit history for up to seven years. This can get in the way of buying a house, getting approved for new credit cards, borrowing money and more.
If an identity thief uses your information to secure loans, apply for government benefits or take over your online accounts, you could find yourself working for years to clean up the mess. Some employers look at credit scores before hiring, so it could cost you job opportunities. Lastly, there’s the emotional toll that identity theft can take since it can feel like a privacy violation.
Warning Signs of Identity Theft
ID theft can happen quickly and unexpectedly. Early detection is key to reducing damage and protecting your credit. Here are a few warning signs that your information has been compromised.
- Unfamiliar financial transactions: Often the first sign of financial identity theft is strange activity on account statements. Don’t just monitor your bank statements. Also monitor credit card statements, and be on alert for any unusual transactions.
- Suspicious mail activity: Fraud often redirects bills and other communications. If you’re missing mailings or you receive communications in the mail addressing activity you didn’t initiate, check your credit and bank accounts to see if something’s amiss.
- Strange credit report entries: You can get one free credit report a year through AnnualCreditReport.com. Take advantage of this and scrutinize it for any unfamiliar accounts.
- Rejected requests: Rejected credit applications or medical claims could be a sign that someone else has been using your information. This also applies to rejected IRS e-filings.
- Overdue and collection notices: If you receive a call or mailing from a creditor or collection agency, don’t take it at face value. Research to make sure that you actually were responsible for the bill. Someone could have applied for services or made a purchase using your information.
Avoiding Identity Theft
The first step toward avoiding identity theft is to protect your information. Use complex passwords and take caution when giving out account numbers or Social Security numbers when asked. Take care with your physical documentation, as well, shredding sensitive documents before tossing them in the trash.
There are tools in place that can help you stay safe. Equifax and Experian offer both credit monitoring services and identity theft protection. If you don’t plan to apply for credit in the near future, you can also freeze your credit to avoid someone else using it.
Recovering From Identity Theft
It’s important to take action as soon as you spot suspicious activity. If your accounts have been compromised, contact any affected financial institutions and credit card companies immediately to ensure that the thief can’t make additional purchases. If you have evidence or know the person responsible, file a police report and ask for a copy of that report for your records.
If you have identity theft protection in place, your next step should be to file a claim. You’ll need to report the identity theft to the Federal Trade Commission either through its website at IdentityTheft.gov or by calling 1-877-438-4338. If your identity theft is related to your tax return, you’ll need to complete Form 14039 Identity Theft Affidavit.
By putting in place protections and a recovery plan, you’ll be able to prevent ID theft and respond quickly if your identity is ever stolen. It’s important to protect your financial information and use security precautions with all your online activities. Identity theft is common, but in many instances, the damage can be dramatically reduced by simply monitoring your accounts and reacting swiftly.
- Federal Trade Commission: What To Know About Identity Theft
- Consumer Affairs: 2022 Identity Theft Statistics
- Experian: The Many Different Forms of Identity Theft
- Cornell Law School: Credit Card Fraud
- Cybersecurity & Infrastructure Security Agency: Stop Ransomware
- FBI: Ransomware
- Experian: When Does the 7 Year Rule Begin for Delinquent Accounts?
- State of Georgia Consumer Protection Division: Identity Theft: Emotional Impact
- Federal Trade Commission: Avoiding Identity Theft
- IRS: Identity Theft Affidavit
Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.