What Is Identity Theft? Types and Prevention Strategies

Imagine someone using your Social Security number to open new credit cards, racking up debt in your name! Scary, right?

In our increasingly digital world, our personal information is constantly under threat. If you've ever worried about someone stealing your personal information to open new accounts in your name, you're not alone. Millions of people fall victim to identity theft every year.

While it is a major concern for individuals, the impact can be equally disastrous for businesses. That's where employee identity theft protection software comes in. They protect the personal data of the individual from unauthorized access and cyber-attacks. 

There's no way to inoculate yourself against identity theft completely. But if you're diligent in learning how your information can be at risk and what fraudsters can do with it, you'll be better equipped to protect your data and act quickly if someone does manage to steal it.

Types of identity theft

Identity theft is a serious crime where someone steals your personal information and uses it for their own gain. This can have a devastating impact on your finances, credit score, and even your health. Here are the most common types of identity theft:

• Financial identity theft: This is the most common type. Thieves use your financial information, like bank account numbers or credit card details, to make unauthorized purchases, open new accounts, or even steal money directly.
• Social Security number theft:  If someone gets your Social Security number, they can use it to apply for loans, credit cards, and even government benefits in your name. This can leave you with a mountain of debt and a damaged credit score.
• Medical identity theft:  In this case, a thief uses your personal information to receive medical services in your name. This can lead to inaccurate medical records and even deny you coverage in the future.
  
• Synthetic identity theft:  This is a more sophisticated form of theft where criminals combine real and fake information to create a completely new identity. They then use this fake identity to open fraudulent accounts and make purchases.
  
• Child identity theft:  Sadly, children are also vulnerable to identity theft. Thieves can use a child's Social Security number to get credit cards, loans, or driver's licenses. Since children typically don't have established credit, this fraud can go undetected for years.
  
• Tax identity theft:  In this scenario, someone uses your Social Security number to file a fake tax return and steal your tax refund.
  
• Criminal identity theft:  A criminal might use another person's identity to avoid arrest or hide a warrant.

How does identity theft happen?

• Physical theft:  This is a classic method. Thieves target wallets, purses, and unattended belongings to steal your ID, credit cards, and Social Security number. They might also resort to dumpster diving, searching your trash for discarded documents containing personal information. Be mindful of your surroundings and avoid carrying unnecessary documents.
• Social engineering:  This involves manipulating you into revealing personal details. Phishing scams are a prime example. These fraudulent emails, texts, or phone calls appear from legitimate sources like banks or credit card companies, tricking you into clicking malicious links or divulging sensitive information.  Pretexting is another tactic where thieves pose as trustworthy figures like debt collectors to gain your confidence and extract personal details.
• Tech-fueled threats:  Cybercriminals leverage technology to steal your data. Malware, malicious software installed on your devices through infected websites or attachments, can steal your login credentials, financial data, and other sensitive information. Skimming involves installing hidden devices on ATMs, card readers, or gas pumps to steal your card information when you swipe.
• Data breaches:  When companies experience data breaches, hackers can gain access to vast amounts of personal information, including yours. This stolen data can then be sold on the dark web and used for fraud.

How to check for identity theft

Checking for identity theft involves being vigilant and proactive. Here are some steps you can take:

• Monitor your credit reports regularly: You can get free credit reports weekly from all three major credit bureaus (Equifax, Experian, and TransUnion) through AnnualCreditReport.com [Annual Credit Report]. Review these reports for any unrecognized accounts, inquiries, or suspicious activity.
• Review credit card and other financial statements:  Scrutinize your bank account statements and credit card bills for any unauthorized charges or withdrawals.  Be wary of any unfamiliar accounts or activity.
• Be alert for collection calls for unknown debts:  If you receive calls from debt collectors about debts you don't recognize, it's a red flag that someone might be using your identity to obtain credit.
• Enable account alerts:  Many financial institutions and credit card companies offer account alert options. Sign up for these alerts to receive notifications of any suspicious activity on your accounts, such as new login attempts or large purchases.

How to prevent identity theft

Use strong passwords: Create strong, unique passwords for your online accounts and update them regularly. Consider using a password manager to generate and store complex passwords securely.

• Two-factor authentication (2FA): Enable multifactor authentication whenever possible. This adds an extra layer of security by requiring a code from your phone or email in addition to your password.
• Careful online sharing: Be cautious about sharing personal information, especially on social media. Don't overshare details like your birthday, address, or full name.
• Secure your devices: Install and regularly update data security software on your computers, smartphones, and other devices. Enable firewalls and encryption, and be cautious when connecting to public Wi-Fi networks.
• Shred documents containing personal or financial information before discarding them, especially pre-approved credit offers, bank statements, and receipts.
• Identity theft protection services are companies that offer a variety of features to help you monitor and protect your personal information. These services can provide peace of mind by helping you detect identity theft early on, which can minimize the damage and make it easier to recover.
• Be cautious on work computers: Avoid accessing personal accounts or storing sensitive personal information on work computers. Public Wi-Fi at work can also be risky, so avoid using it for sensitive transactions.

Recovering from identity theft

Reporting identity theft is crucial for minimizing its impact and taking steps to resolve the situation. Here's how you can report identity theft:

• Report the identity theft to the Federal Trade Commission (FTC). You can do this online at https://www.identitytheft.gov/ or by calling 1-877-438-4338. Filing a report with the FTC helps you create a recovery plan and provides documentation of the theft.
• File a report with your local police department: Visit your local police department or precinct to file a report about identity theft. Provide as much detail as possible about the incident and any evidence you have, such as fraudulent transactions or communications.
• Notify your financial institution: Contact the fraud department at your bank, credit card issuers, and any other companies where you suspect fraudulent activity. Close any accounts that have been opened fraudulently and report any unauthorized transactions.
  
• Contact the credit reporting agencies: Request a fraud alert or security freeze on your credit reports by contacting the three major credit reporting agencies (Equifax, Experian, and TransUnion)  

Act now before it’s too late

Identity theft can be a scary and stressful experience. By taking proactive steps to protect yourself,  you can gain peace of mind knowing you have an extra layer of security.  

Remember, vigilance is key.  Stay informed about the latest scams, and monitor your financial statements closely. With awareness and identity theft protection, you can significantly reduce your risk of falling victim to this crime.

Learn more about managing software assets and avoid costly mistakes like identity theft.

This article was originally published in 2019. It has been updated with new information.