What Is Identity Theft?

Physical items aren’t the only things that can be stolen.

By
&
Aliza Vigderman
Gabe TurnerChief Editor
Last Updated on May 13, 2021
By Aliza Vigderman & Gabe Turner on May 13, 2021

Identity theft is one of those scary concepts that you hear about on the news occasionally, but you may not know what it is in the first place. Well, knowledge is power, and in knowing what identity theft is, you can protect yourself, your family, and your personally identifiable information (PII).

What Is Identity Theft?

Identity theft is when someone steals personal information such as your Social Security number (SSN), full name, address, or birthdate to make purchases, open new accounts, receive tax refunds, etc.1

Types of Identity Theft

Identity theft comes in many forms. These are some of the most common:

  • Medical: Medical ID theft happens when someone uses another person’s name or health insurance information to obtain drugs, file an insurance claim, see a doctor, or receive other medical benefits.
  • Child: Children are susceptible to identity theft along with adults. According to our child identity theft research, 14 percent of U.S. parents said that their children have had their identities stolen, which accounts for about 10 million children overall. That’s why it’s important to get identity theft protection for families, so children are covered along with their parents.
  • Business: Individuals aren’t the only victims of identity theft. Businesses can also have their identifying information stolen to obtain tax benefits and file fraudulent business returns.2
  • Other types of identity theft: There are many types of identity theft, more than we can name here, but to list a few, there’s estate, tax, phone, military, wire transfer, familiar fraud, driver’s license, mail, online shipping, SSN, and senior identity theft.34

How Does Identity Theft Happen?

Identity theft can happen in a number of ways, such as these:

  • A lost Social Security card
  • A data breach
  • Stolen wallets or purses with identification cards, credit cards, etc.
  • Stolen mail that includes bills, tax information, bank statements, etc.
  • Change-of-address forms that redirect mail to the identity thief
  • Dumpster diving to obtain discarded PII
  • PII that people inadvertently share online5

NOTE: Many people don’t realize that they’re sharing PII on social media. For example, our research on parents’ social media habits found that more than 8 in 10 parents use their children’s real names in posts, putting them at risk of identity theft.

What Can Identity Thieves Do With Your Information?

Once identity thieves have stolen other people’s PII, they can use it to do the following:

  • Establish new credit lines
  • Open bank accounts
  • Get auto loans
  • Commit crimes
  • Get quick payday loans
  • Cash in on health insurance benefits
  • File tax returns

How To Check if Your Identity Has Been Stolen

If you think someone stole your identity, the first step is to take a deep breath. Then, here’s how you can check if your identity has been stolen:

  • Track your bills. Not receiving an expected bill isn’t a good thing. If you stop getting a regular bill, like an electricity bill, it may indicate that someone has changed your billing address. On the flip side, if you get a new bill or find charges for things you didn’t buy, that could also be a sign of identity theft.
  • Check your bank account. See any purchases you don’t remember making? Someone may be using your debit or credit card numbers.
  • Check your credit report. Finally, look for unknown accounts on your credit reports from all three bureaus — Experian, TransUnion, and Equifax. You’re obligated to receive free credit reports from all three bureaus annually.
    Experian Credit Reports
    Experian Credit Reports

Signs of Identity Theft

If you’re still not sure if your identity has been stolen, look for these signs:

  • A notice from the IRS saying your identity has been stolen
  • Bank account withdrawals that you don’t recognize
  • Unfamiliar bills
  • Calls about unfamiliar debts

What To Do if Your Identity Has Been Stolen

If you’ve figured out that someone else has been using your PII, here’s what to do after identity theft.

How To Report Identity Theft

  1. Report the fraud to the Federal Trade Commission. The FTC provides victims with free recovery plans for over 30 types of identity theft.
  2. Call any companies where the fraud may have occurred, like a bank or store, to let them know of the fraudulent activity.
  3. Place a fraud alert on your credit report, which acts as a red flag for creditors and lenders.
    Credit-reporting bureau URL Phone Mailing address
    Equifax equifax.com/consumer-registration/UCSC/#/personal-info 888-836-6351 Equifax Information Services LLC
    P.O. Box 105069
    Atlanta, GA
    30348
    Experian experian.com/fraud/center.html 888-397-3742 N/A
    TransUnion https://www.transunion.com/fraud-alerts 800-680-7289 TransUnion Fraud Victim Assistance
    P.O. Box 2000
    Chester, PA 19016
  4. Get copies of your credit reports so you can review them for unusual activity.
  5. If you already have identity theft insurance, contact the recovery specialist and file a claim with your identity theft insurer.

How To Prevent Identity Theft

Let’s take a step back. How can you protect your information so you never have to worry about fraud alerts, identity restoration, and the general headache of having your identity stolen?

Identity Theft Protection

Most of the top identity theft protection services include identity monitoring, credit protection, identity restoration, and identity theft insurance. The services can detect if someone is using your PII by monitoring areas such as these:

  • USPS change-of-address requests
  • Court orders
  • Arrests
  • Sex offender registries
  • Orders for new utility, cable, or wireless services
  • Payday loan applications
  • Check-cashing requests
  • Public records
  • Credit applications
  • Dark web

Most of the services will also monitor your credit reports from the three bureaus. Look for the best credit monitoring services or the best identity theft protection with credit reporting. You should also look for identity theft protection with dark web monitoring as well as identity theft protection with fraud detection.

Identity Guard Activity Alert
Identity Guard Activity Alert

Most identity theft protection services also include an identity restoration service. This means that trained case managers will help you regain control of your identity and finances after a theft, which includes writing to your creditors to freeze your reports and alerting other institutions to the theft. See the best identity theft protection with restoration.

Lastly, most services also include identity theft insurance, which covers out-of-pocket expenses associated with reclaiming your identity. Unfortunately, this usually doesn’t include any lost wages, stolen money, or legal fees, but only postage, notary costs, and the like. The identity theft insurance may or may not have deductibles, limitations, and exclusions, but don’t worry; homeowners and renters insurance companies typically cover financial losses.

Protecting Your Computer

Keeping your information safe online is essential to protect your identity. Aside from using identity theft protection, make sure you’re following the best digital security practices:

TIP: The easiest way to remember, store, and share your passwords securely is to use a password manager. Popular options include Dashlane and LastPass.

  • Use authentication. To prevent account takeovers, add two- or multi-factor authentication to your accounts. That way, even if someone has your password, they’ll still need more authentication before they can access your account, such as a passcode sent to your phone or biometrics like your fingerprint.
  • Use encryption. You’re not still storing all of your passwords in an unprotected Word document on your computer, are you? Instead, store sensitive information in encrypted storage, and communicate on encrypted messaging apps like Signal or WhatsApp.

Best Practices

Along with downloading digital security software, follow these general best practices to decrease your risk of identity theft:

  • Read your card and bank statements often to look for unfamiliar information.
  • Read your health insurance plan statements to look for unfamiliar claims.
  • Shred any documents that contain your PII or financial information before you throw them away.
  • Keep track of your bills and their due dates.
  • Review your credit reports from all three bureaus.

Recap

Identity theft is unsettling, but it’s not a death sentence. Even if your identity is stolen, you can typically resolve it so that your credit isn’t affected permanently. Identity theft protection services automate the process of scanning multiple areas for your PII, and they’re the easiest way to prevent and deal with identity theft.

Frequently Asked Questions

Identity theft is such a big topic that we couldn’t fit all of your questions into this article, but we’ve compiled the questions we get the most and answered them here.

  • What are the three types of identity theft?

    There are more than three types of identity theft, but three common examples are child identity theft, medical identity theft, and business identity theft.

  • What are some examples of identity theft?

    These are some examples of identity theft:

    • Someone filing a tax return using another person’s Social Security number
    • Someone committing a crime and then pretending to be someone else
    • Someone filing a change of address with the USPS to redirect mail and steal personally identifiable information
  • What is the risk of identity theft?

    There are several risks of identity theft, including these:

    • Decrease in credit score
    • Financial losses
    • Emotional distress
    • Difficulty getting loans, credit cards, savings and checking accounts, housing, jobs, etc.
  • Are identity thieves ever caught?

    Identity thieves have been caught before, but it’s unlikely in most cases. According to a report presented to the U.S. Department of Justice, most identity theft cases remain unresolved, with no offenders identified or arrested. Even when offenders are caught, they rarely receive punishment.

Citations
  1. Federal Trade Commission. (2021). What To Know About Identity Theft.
    consumer.ftc.gov/articles/what-know-about-identity-theft

  2. Internal Revenue Service. (2021). Tax Practitioner Guide to Business Identity Theft.
    irs.gov/tax-professionals/tax-practitioner-guide-to-business-identity-theft

  3. Federal Trade Commission. (2021). 7 Identity Theft Schemes That Target Seniors.
    ftc.gov/sites/default/files/documents/public_comments/ftc-seeks-public-input-how-identity-theft-impacts-senior-citizens-project-no.p065411-00009%C2%A0/00009-83187.pdf

  4. Experian. (2020). The Many Different Forms of Identity Theft.
    experian.com/blogs/ask-experian/20-types-of-identity-theft-and-fraud/

  5. National Science Foundation. (2021). Identity Theft: What can you do to protect yourself?
    nsf.gov/oig/_pdf/brochures/identitytheft.pdf