10 Ways to Prevent Identity Theft | ID Theft Guide

Betty Q. Hixson

Popular Identity Theft Protection Companies

You use your personal data to perform a myriad of tasks every day, including accessing bank and credit card accounts, email, social media sites, and other password-protected accounts. Although this data is usually encrypted, that doesn’t mean it’s completely secure. In fact, your personal information, and thus your identity, can be stolen and used by criminals for their financial gain.

The Federal Trade Commission’s Consumer Sentinel Network, which tracks consumer fraud and identity theft complaints, received 1.4 million reports of identity theft in 2020. The most common types of identity theft that year included government documents or benefits fraud, credit card fraud, and loan or lease fraud. “Our information is pretty much all over the place, and that information is being used to commit crimes and fraud,” says Henry Bagdasarian, founder and executive director of the Identity Management Institute.

The good news is that you can help prevent identity theft with some basic due diligence and by using free tools to help you monitor your credit and receive credit card and bank account notifications. In addition, subscribing to an identity theft protection service will provide an extra layer of protection that most experts recommend.

Infographic on how many people have their IDs stolen in the U.S. each year

According to the U.S. Department of Justice, identity theft (also known as identity fraud) refers to crimes in which someone wrongfully uses someone else’s personally identifiable information (PII) in a way that involves fraud or deception, usually for financial gain. Identity theft can be accomplished through an array of crimes, such as credit card fraud, account takeovers, hacking, phishing, social media fraud, impersonation, tech support fraud, and ransomware attacks. PII includes things like your Social Security number, date of birth, credit and bank account numbers, passwords, passport numbers, birth and death certificates, telephone numbers, medical ID number, and biometric data like fingerprints and scans – anything that can be used to identify you.

Criminals can steal your PII and use it to run up charges on credit cards or open new accounts in your name, withdraw cash from your bank accounts, or get medical care using your health insurance. The Federal Trade Commission advises consumers to pay close attention to unexplained bank account withdrawals, calls from collections agencies about debts that aren’t yours, or notices that your account information was compromised by a data breach. A fraudster can file a tax return in your name and get a refund. You might get a notice from your health insurance provider that a claim was filed for treatment you never received. These are clues that someone might have compromised your PII.

Our personal data is everywhere, and providing information like passwords and account numbers to access online accounts is something many of us do on a daily basis. Unfortunately, whenever we supply our PII, we are taking some level of risk that a criminal could steal and misuse it. But there are ways to reduce the likelihood of identity theft, and many of these strategies are simple and free.

The best way to help prevent identity theft is to sign up for an identity theft protection service. Although an identity theft protection service can’t prevent identity theft, it can alert you promptly when it happens to limit the damage and help you recover. Identity theft protection can help safeguard your personal information for a monthly or annual fee. Subscriptions can include monitoring of credit reports, financial accounts, medical information, social media activity, the dark web, and more. Identity theft protection companies also provide recovery services if your information is compromised. Some offer identity theft coverage of up to $1 million and access to attorneys or private investigators to help you restore your credit and reputation. Most also give you a dashboard to view notifications and contact customer service if fraudulent activity occurs.

Besides subscribing to an identity theft protection service, there are other ways to help prevent identity theft. These include:

1. Freeze your credit.
When you freeze your credit file, no one can look at or request your credit report. Therefore, no one (including you) can open an account, apply for a loan, or get a new credit card while your credit is frozen. To freeze your credit, you must contact each of the three credit reporting agencies: Experian, Equifax, and TransUnion. The credit bureaus provide online, telephone, or mail-in options for freezing your account. Upon doing so, they will provide you with a PIN or passcode you can later use if you temporarily lift or stop the credit freeze. Credit freezes are free and won’t impact your credit score.

Parents should seriously consider freezing their children’s credit files. A 2021 study by Javelin Strategy & Research found that child identity fraud costs U.S. families nearly $1 billion annually. About 1 in 50 U.S. children were victims of ID fraud, and 1 in 45 had personal information that was exposed in a data breach. This can cost the average family more than $1,000.

“It’s a good idea to put a freeze on children’s credit files and to monitor those files as they approach their teen years,” says Robert Douglas, an information and security consultant and certified identity theft risk management specialist. “There are plenty of horror stories out there of people finding out that their child’s credit worthiness has been harmed at a critical point when they need a good, clean record like when applying for a student loan.”

2. Collect mail daily.
Some of the ways that criminals can steal your identity are decidedly low-tech. For example, they can simply take bank or credit card statements, utility bills, health care or tax forms, or pre-approved credit card offers out of your mailbox. Thieves also can reroute your mail by submitting change-of-address requests in your name, so keep track of expected mail that doesn’t arrive. In addition, put your mail on hold while you’re away.

3. Review credit card and bank statements regularly.
It’s important to regularly review your credit card and bank statements, because someone with your credit card number or bank account information could make small charges to see if they can get away with it. These transactions can easily slip through the cracks without you or your financial institution noticing them. Know your statement cycles and follow up with credit card companies and financial institutions if you don’t receive statements on time. Credit card fraud is the most common type of identity theft, based on FTC Consumer Sentinel Network statistics.

4. Shred documents containing personal information before disposing of them.
Dumpster diving might sound like an old-fashioned way of stealing personal information, given the influx of phishing scams and online data breaches, but criminals still do it. While some people might be looking for valuables or furniture, others are looking to steal your data.

Keep a few months of credit card and bank statements, utility bills, IRS correspondence, and other documents containing PII in a secure location like a safe. Shred the rest. Bagdasarian says he keeps his last three bank statements somewhere safe, replacing them with new ones every month.

5. Create different passwords for your accounts
A secure password is long, complex, and unique, according to the FTC. Create different passwords for various accounts. Avoid using information related to your identity, such as the last four digits of your Social Security number, your birthday, your initials, or parts of your name.

The FBI and National Institute of Standards and Technology recommends creating passwords with at least 15 characters because these are more difficult for a computer program or hacker to crack. As for security questions, the FTC advises selecting questions that only you can answer, instead of information that could be available online like your ZIP code, birth place or mother’s maiden name. Also, avoid giving generic responses, such as “chocolate,” as your favorite dessert. For more information, see How to Create Strong Passwords.

6. Review credit reports annually
Requesting your credit reports from Equifax, TransUnion, and Experian is free, and you should do so annually. Accessing your credit reports won’t lower your credit score, and you can easily request them online. Also, the bureaus provide tools to help you monitor your credit, such as alerts to notify you of key changes. Ideally, pull your report from the bureaus at different times throughout the year so you are continually monitoring activity. You can also request free annual credit reports at AnnualCreditReport.com.

7. Install antivirus software
Antivirus software can prevent hackers from accessing information on your computer and mobile devices. The FTC says you might be a victim of malware, which includes viruses, spyware, and other unwanted software, if your computer:

  • Slows down, crashes, or displays error messages
  • Fails to shut down or restart
  • Delivers pop-ups or other unwanted ads
  • Sends you to web pages you didn’t search for
  • Shows new, unexpected toolbars
  • Changes your default web browser
  • Drains its battery quickly

Because criminals can more easily hack outdated software, keep your antivirus software current or set it to update itself automatically. For more information, see How Does Antivirus Software Work?

8. Enable two-factor authentication on devices and accounts
Stolen or compromised passwords account for 81% of hacking-related breaches, according to a 2017 Data Breach Investigations Report from Verizon. Two-factor authentication (2FA) adds an extra layer of password security and can be enabled for email, social media accounts, bank accounts, and credit cards. It requires multiple identifiers to unlock an account, including combinations of the following:

  • A PIN code or password
  • A possession, like a smartphone or other device
  • A biometric characteristic, like a fingerprint or voice print. 

Even if your password is stolen, 2FA prevents criminals from accessing your account without your smartphone, voiceprint, or fingerprint. One example of 2FA involves signing into an account with a password, then receiving a text message with a code you must enter to get into the account.
9. Wipe electronics before donating
When you delete files from computers and other electronic devices like tablets, those files aren’t really gone; pieces of them remain and can be reassembled with a data recovery program until they’re overwritten with new data. This can be accomplished with overwriting software that wipes hardware or transfers data from your old computer to a new one.

10. Opt out of prescreened credit card offers
Credit card companies often send pre-screened offers to open new accounts, and criminals can intercept these mailed or emailed offers and open accounts in your name. Shred these offers rather than throwing them in the trash. Your credit report doesn’t show pre-screening that companies perform to give you these offers, so you might not realize that an offer has been stolen from your mail or email.

The safest way to avoid identity theft exposure from pre-screened credit card offers is to opt out of receiving them for five years or permanently through optoutprescreen.com, which is the official consumer credit reporting industry website.

Infographic on the most common types of ID theft

Consumer.gov warns that criminals can access your personal information a number of ways. These include:

  • Hacking
  • Stealing mail to get account numbers or your Social Security number
  • Posing as an impostor and requesting information via email
  • Stealing account numbers from businesses, credit card companies, and medical offices
  • Simply taking your wallet or purse to access credit cards, your driver’s license, and other personal data

You can report identity theft to the FTC, which will help prove to businesses that someone stole your identity. You also have the right to place a one- or seven-year fraud alert on your credit report, request that fraudulent information is removed from your report, and stop debt collectors from contacting you.

You might want to file a police report for identity theft if you know the person who committed the crime, or if you find out the thief used your name or information during a police interaction, such as pretending to be you upon arrest. Credit card companies or financial institutions might request that you file a police report if you claim identity theft and ask them to investigate the case, remove the fraudulent activity from your account or cover the cost of lost funds.

Best Identity Theft Protection Services

To help you choose an identity theft protection service, below is our list of the Best Identity Theft Protection Services of 2022.

For more information about identity theft protection services, see our other guides.

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