What Is Identity Theft?
Definition of identity theft
Identity theft is one of the only types of crimes that can happen to anyone; it doesn’t discriminate based on neighborhood or type of car or anything else that criminals might target. It involves the unauthorized use of another person's personal information, such as their name, Social Security number, or credit card details, for fraudulent purposes, often for things like applying for loans, opening new accounts, and other financially motivated activities. This can lead to significant financial loss, damage to one's credit score, and considerable emotional distress.
The Federal Trade Commission (FTC) defines identity theft as a serious crime that occurs when someone uses your personal information without your permission. The repercussions can be long-lasting, affecting your ability to get credit, secure loans, and even impacting your employment prospects.
Common methods used by identity thieves
Identity thieves employ a range of tactics to obtain personal information. Some of the most common methods include:
- Phishing scams: These involve sending fraudulent emails that appear to come from legitimate sources, such as banks or online retailers. The emails often contain links to fake websites that capture any personal information the victim enters.
- Social engineering: Thieves manipulate individuals into divulging personal information by pretending to be someone trustworthy, like a bank representative or IT support.
- Skimming: This involves capturing credit card information using a device placed on ATMs or point-of-sale terminals.
- Mail theft: Thieves steal mail to obtain personal information, such as bank statements and credit card offers, which they can then use for fraudulent activities.
How Identity Theft Occurs
Phishing scams and email fraud
Phishing scams are among the most prevalent methods of identity theft. These scams typically involve emails that appear to be from legitimate companies, urging recipients to click on a link and enter their personal information. The emails often look convincing, complete with company logos and professional language, making it difficult for individuals to distinguish them from genuine communications.
Phishing emails may also include threats or urgent requests, such as warning that your account will be suspended if you don’t verify your information immediately. Once the victim clicks on the link and enters their data, it’s in the hands of bad actors.
Data breaches and stolen personal information
Data breaches have become alarmingly common, with hackers targeting companies that store vast amounts of personal information. These breaches can compromise millions of records, including Social Security numbers, credit card details, and medical information.
When a data breach occurs, the stolen information is often sold on the dark web, where other criminals can purchase it to commit various forms of identity theft. The impact of a data breach can be long-lasting, as the stolen information can circulate among criminals for years.
Types of Identity Theft
Identity theft can manifest in numerous ways, each with unique challenges and implications. Understanding the different types helps in recognizing the signs and taking the right steps to stop it.
Medical identity theft
Medical identity theft occurs when someone uses your personal information to obtain medical care, prescription drugs, or medical equipment. Thieves might also use your information to file false insurance claims. This can lead to incorrect information being added to your medical records, potentially resulting in improper treatment or denial of services.
Victims often discover medical identity theft when they receive bills for services they did not receive or when their insurance company denies legitimate claims because their benefits have been exhausted.
Financial identity theft
Financial identity theft is one of the most common forms, involving the use of someone else's financial information to make unauthorized transactions or open new accounts. This can severely impact the victim's credit score and financial stability.
Common signs of financial identity theft include unfamiliar charges on your credit card statements, calls from debt collectors about debts you did not incur, and unexpected declines on your credit applications.
Social Security identity theft
In Social Security identity theft, a thief uses your Social Security number to commit various types of fraud, like opening credit accounts, obtaining government benefits, or filing false tax returns. This can lead to significant financial and legal issues, including incorrect records of income and benefits.
Victims might discover this type of theft when they receive notices from the IRS about unreported income or when they attempt to claim benefits and are told they have already been claimed.
Estate identity theft
Estate identity theft involves the use of a deceased person's identity for fraudulent purposes. Criminals might open new credit accounts, apply for loans, or file false tax returns in the name of the deceased. This can create complex legal issues for the heirs and executors of the estate.
To prevent estate identity theft, it is crucial to notify relevant institutions, such as the Social Security Administration and credit bureaus, of the person's death promptly.
Tax identity theft
Tax identity theft occurs when someone uses your Social Security number to file a fraudulent tax return and claim a refund. This can result in significant delays for your legitimate tax refund and complications with the IRS.
Signs of tax identity theft include receiving a notice from the IRS about a duplicate tax return or additional income that you did not report. Resolving this type of theft typically involves extensive communication with the IRS and providing proof of your legitimate tax return.
Criminal identity theft
Criminal identity theft happens when someone provides your personal information to law enforcement during an arrest or investigation. This can lead to wrongful criminal records and legal issues for the victim, including warrants for their arrest or problems during background checks.
Victims often discover this type of theft when they are unexpectedly contacted by law enforcement or when they fail a background check for a job or rental application.
Credit card fraud
Credit card fraud involves the unauthorized use of your credit card information to make purchases. This can occur through physical theft of your card, skimming devices that capture card information, or hacking online accounts.
Monitoring your credit card statements regularly and setting up alerts for suspicious activity can help detect and address credit card fraud promptly.
Identity cloning
Identity cloning involves using someone's personal information to assume their identity completely. This can be used for various purposes, such as opening bank accounts, obtaining jobs, or receiving medical services.
Identity cloning can be particularly challenging to detect because the thief may not immediately cause noticeable financial damage. Victims might discover the theft when they are denied services or credit due to actions taken by whoever has hijacked their identity.
Employee identity theft
Employee identity theft occurs when an employee steals personal information from their employer or colleagues. This can involve accessing sensitive databases or physical documents, such as payroll records or personal files.
Employers should implement strict access controls and regularly monitor for unusual activity to prevent employee identity theft.
Child identity theft
Child identity theft involves the use of a minor's personal information to commit fraud. This type of theft can go undetected for years, as children typically do not use their Social Security numbers until they apply for their first job or credit account.
Parents should monitor their children's credit reports and be cautious about sharing their personal information to prevent child identity theft.
Synthetic identity theft
Synthetic identity theft involves creating a new identity by combining real and fake information. Thieves might use a real Social Security number but a fictitious name and birthdate to apply for credit and commit fraud.
This type of theft can be challenging to detect because it does not involve stealing an existing identity entirely. Victims often discover the theft when they attempt to use their Social Security number for legitimate purposes and encounter unexpected issues.
Mail identity theft
Mail identity theft occurs when someone steals your mail to obtain personal information, such as bank statements, credit card offers, or tax documents. This information can then be used for various fraudulent activities.
Using a locked mailbox or opting in for electronic statements can help to reduce this kind of identity theft.
Senior identity theft
Senior identity theft targets older adults, often through scams that exploit their trust and lack of familiarity with modern technology. Criminals might pose as government officials, financial advisors, or family members to obtain personal information and commit fraud.
Educating seniors about common scams and encouraging them to be cautious with their personal information can help prevent this type of theft.
Biometric ID theft
Biometric ID theft involves stealing biometric data, such as fingerprints, facial recognition, or iris scans, to commit fraud. As biometric authentication becomes more common, this type of theft poses increasing risks.
Securing biometric data with advanced encryption and being cautious about where and how biometric information is stored can help mitigate the risks of biometric ID theft.
Responding to Identity Theft
Steps to take if you suspect identity theft
If you suspect that you are a victim of identity theft, it is crucial to act quickly to minimize the damage. Here are the steps you should take:
- Monitor your accounts: Regularly check your bank and credit card statements for unfamiliar transactions. Set up alerts for suspicious activity.
- Place a fraud alert: Contact one of the major credit bureaus (Equifax, Experian, or TransUnion) to place a fraud alert on your credit report. This will make it harder for thieves to open new accounts in your name.
- Freeze your credit: Consider placing a credit freeze on your reports to prevent new creditors from accessing your credit file. This can help stop new accounts from being opened in your name.
- Notify financial institutions: Inform your bank and credit card issuers about the suspected identity theft. They can help secure your accounts and issue new cards if necessary.
- Document everything: Keep detailed records of your communications and actions. This will be useful if you need to provide evidence to authorities or credit bureaus.
- Change passwords: Update your passwords for all online accounts, especially those related to banking, email, and social media. Use strong, unique passwords and enable two-factor authentication.
Contacting authorities and credit bureaus
Reporting identity theft to the appropriate authorities is essential for protecting yourself and helping to catch the perpetrator. Here are the key steps:
- Report to the FTC: File a report with the Federal Trade Commission (FTC) at IdentityTheft.gov. The FTC will provide you with a recovery plan and the necessary forms to report the theft to other organizations.
- File a police report: Contact your local police department to file a report. Provide them with any evidence of the theft, such as fraudulent transactions or correspondence.
- Notify credit bureaus: Contact Equifax, Experian, and TransUnion to place a fraud alert or credit freeze on your accounts. Request copies of your credit reports and review them for unauthorized activity.
- Contact the IRS: If your Social Security number has been used fraudulently, notify the IRS. They can provide guidance on protecting your tax records and preventing further misuse.
- Reach out to other agencies: Depending on the type of identity theft, you may need to contact other agencies, such as the Social Security Administration, your state's Department of Motor Vehicles, or your insurance company.
Protecting Yourself From Identity Theft
Creating strong passwords and using two-factor authentication
How you handle yourself online is one of the most important ways to avoid identity theft. This means consistently following best practices that keep your data safe. One of the first steps in helping avoid online identity theft is to use strong, unique passwords for all your online accounts, because passwords are still the most common first step for being able to access accounts. Avoid using easily guessable information, such as birthdays or common words, and opt for complex combinations of letters, numbers, and special characters.
Two-factor authentication (2FA) adds an extra layer of security by requiring a second form of verification, such as a text message code or biometric scan, in addition to your password. Enabling 2FA on your accounts can significantly reduce the risk of unauthorized access, which prevents anyone from being able to access your accounts, personal data, and ultimately better prevent identity theft.
Being cautious with sharing personal information online
Be mindful of the personal information you share online, particularly on social media. Avoid posting sensitive details, such as your full birthdate, address, or phone number. Use privacy settings to control who can see your information and be cautious about accepting friend requests or connections from strangers.
When conducting financial transactions or sharing sensitive information online, ensure that the website is secure by looking for "https" in the URL and a padlock icon in the browser address bar.
LastPass Solutions for Identity Theft Prevention
Password manager benefits for securing personal information
Over half of people (62%) still reuse their passwords, which drives up the risk of identity theft; if a password is found online after a breach, it can be used across other apps and accounts if those have the same password. Using a password manager like LastPass can significantly enhance your security by generating and storing strong, unique passwords for each of your accounts. This eliminates the need to remember multiple complex passwords and reduces the risk of using weak or reused passwords.
LastPass can also be easily used across devices and automatically syncs your passwords, which means that you can log in seamlessly from computers, tablets, and phones, from anywhere.
Using LastPass to generate and store strong, unique passwords
LastPass offers a password generator that creates highly secure passwords based on customizable criteria, such as length and character types. These passwords are stored in an encrypted vault that only you can access.
LastPass's security dashboard provides an overview of your password health and alerts you to any weak or reused passwords that need updating.
Identity theft is a pervasive and evolving threat that can have devastating consequences and proactive protection is a much stronger strategy than trying to manage damage control after an incident. Using tools like LastPass to manage and secure your passwords is an easy way to better safeguard your personal information.
