What is Identity Theft?

Whether it’s imposter scams or online shopping swindles, identity theft continues to be a major issue–– and can happen to anyone.

The best protection is education. Let’s take a look at what identity theft is and how to help prevent it.

What is identity theft?

Identity theft is when someone steals your personal information and uses it to commit fraud.

Identity thieves are always looking for ways to get a wide range of private information, including your: ¹

• Bank account numbers
• Driver's license or passport number
• Name and address
• Passwords and PINs
• Social Security number

If stolen, this information could be used to: ²

• Access healthcare
• Apply for a job or loan
• File fake tax returns
• Make unauthorized purchases
• Open a new utilities or credit account

Identity theft can cause major financial loss and credit damage, as well as steal your sense of security. Understanding how it happens –– and how to protect yourself –– may help you avoid these outcomes.

How does identity theft happen?

Identity theft can take many forms, but one of the clearest signs is finding an account on your credit report that you don’t recognize. In these cases, someone may have used your personal information –– such as your Social Security number or date of birth –– to open a credit card, apply for a loan or sign up for services in your name. Unlike credit card fraud, which involves unauthorized charges on an existing account, identity theft often involves creating entirely new accounts without your knowledge.

So how do identity thieves get access to your information in the first place? Let’s take a closer look.

Phishing scams

More advanced hackers will create phishing scams, such as email or text message campaigns, designed to get you to share personal information. Phishing scams are created to seem like you're receiving a message from a legitimate company but often include links that direct you to a fake website to capture your personal information.

Data breaches

Each of your online accounts contains your personal data. While companies do their best to protect your information, hackers can sometimes gain access to customer information through data breaches.

Discarded documents

Dumpster-diving thieves could obtain your personal information from documents like bank statements that you’ve thrown away.

Using an unsecured network

Using a public Wi-Fi network, or a home network without WEP or WPA security, allows hackers to more easily access your private information.

10 ways to prevent identity theft

No one solution prevents identity theft, but using a combination of the following safety measures may help reduce your risk.

1. Avoid using unsecured Wi-Fi

When possible, avoid connecting to public Wi-Fi. If you must connect to a public Wi-Fi, don’t log into any password-protected sites or apps, especially banking-related ones. Be sure to choose a complicated password for your home Wi-Fi network and secure it with WEP or WPA security, which will make it harder for hackers to access your private files.

2. Use strong passwords

Just as you should create a strong password for your wireless network, you should also create strong passwords for each and every one of the websites with logins that you visit. When possible, opt in for two- or multi-factor authentication, which confirms your identity via email or text message.

If you have trouble remembering passwords, use a password manager to create and securely manage all of your passwords in one place.

3. Sign up for alerts from your bank and credit card accounts

Most banks and credit card companies allow you to sign up for alerts, which can notify you of any suspicious activity on your account.

4. Shred documents with personal information

If you’re throwing away documents like bank or credit card statements, consider using a shredder to make the contents illegible. Better yet, sign up for e-statements to keep your information digital, which is a safer and environmentally friendly solution.

5. Beware of “Phishermen”

Always double-check that the sender's email address matches the one you expect. Scammers typically use fake addresses that look similar to real ones to trick you.

Even if you think a sender is trustworthy, stay alert. Keep an eye out for excessive misspellings and poor grammar, urgent and time-sensitive demands, and always check that website URLs are correct. If something doesn’t feel right, exit the email right away. And, of course, never download files, click links or open attachments from someone you don’t know. Learn more about how to identify phishing scams.

6. Keep personal information off social media

Someone who overshares is a scammer’s favorite type of person. Be extremely cautious on any public accounts you may have, and avoid sharing any of the following information in your bio or posts:

• Birth date
• Address
• Phone number
• Social Security number
• Mother’s maiden name

7. Update anti-virus software

Be sure that your anti-virus, anti-spyware and anti-phishing software are up-to-date and performing regular checkups.

8. Monitor monthly statements

Be careful about monitoring your monthly bank and credit card statements. Sometimes, scammers aren’t looking to make large purchases. Instead, they may use your card for small monthly subscriptions, which are easy to overlook because they're not expensive.

9. Check your credit reports, and freeze your credit file if needed

Request a free annual copy of your credit report to look for any potential red flags, like loans in your name that you did not take out. If you notice anything suspicious, be sure to freeze your credit as soon as possible.

A credit freeze restricts access to your credit report, making it much harder for identity thieves to open new accounts in your name. Here's what you should know:

• It's free to freeze and unfreeze your credit with all three major credit bureaus.
• You can lift a freeze temporarily if you’re applying for new credit, and in many cases, this can be done online or by phone within minutes.
• A freeze does not affect your credit score or prevent you from using your existing credit accounts.
• Unlike a fraud alert, which lasts one year and requires creditors to take extra steps to verify your identity, a credit freeze remains in place until you remove it. ⁴

Freezing your credit file is a powerful safeguard –– but just remember to lift it when you need to apply for a mortgage, loan or credit card.

How to know if someone stole your identity

It isn’t always possible to know right away if your information has been fraudulently used. Watching for these warning signs could help you identify potential identity theft as early as possible: ⁵

• A sudden drop in your credit score
• Bills or collection calls for accounts you didn't open
• Issues with your tax return, such as a duplicate return alert
• Unexpected accounts or inquiries on your credit report
• Unfamiliar medical bills or explanation of benefits letters

Enrolling in an identity recovery service may make it easier to monitor the way your personal information is used – and alert you to unusual activity that could signal identity theft.

What to do when you think you’re a victim of identity theft?

If you think someone has stolen your identity, it’s important to act quickly. By following these steps, you may be able to limit the damage and protect your personal information from further misuse.

1. Lock your financial accounts

If you notice a charge on your credit card that you didn’t make, contact your credit card company right away to freeze your account and prevent further charges. They’ll also send you a new card with a new number. Be sure to change your online password for the breached account and keep a close eye on your other accounts.

2. Check your credit report

Review a copy of your credit report from each of the major credit-reporting bureaus. If you see any suspicious activity, dispute it as soon as possible.

3. Request a credit freeze

Request a credit freeze from each of the three major credit bureaus individually, by phone, mail, online or through their app. Keep in mind that you’ll need to remove the freeze if you choose to apply for credit in the future.⁶

4. File a police report

If you’ve fallen victim to more sinister forms of identity theft, such as a loan scam or someone using your information to file for unemployment insurance, file a police report with your local law enforcement agency and send a copy of the report to each company where an unauthorized account was opened.

5. File an identity theft report with the Federal Trade Commission (FTC)

Visit IdentityTheft.gov to report potential identity theft to the FTC.

The FTC will help you create and follow a personal recovery plan, which may include pre-filled forms and letters you can send to companies where fraudulent accounts were opened, or your existing accounts were accessed without authorization. ⁷

Smart moves to safeguard your identity

Checking your credit score regularly, monitoring financial accounts closely and keeping your personal information private are all smart moves to protect your financial future and peace of mind.

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1. https://www.usa.gov/identity-theft
2. https://consumer.ftc.gov/articles/what-know-about-identity-theft
3. https://creditcards.usnews.com/articles/what-is-a-credit-card-skimmer-and-how-you-can-protect-yourself
4. https://consumer.ftc.gov/articles/credit-freeze-or-fraud-alert-whats-right-your-credit-report
5. https://www.experian.com/blogs/ask-experian/what-is-identity-theft
6. https://www.experian.com/blogs/ask-experian/credit-education/preventing-fraud/security-freeze/
7. https://www.identitytheft.gov/

This article has been updated from postings from 2021-2022. Melina Duffett, Jessica Leshnoff, and Kim Gallagher contributed.