- Identity theft is when a person steals your personal information to commit fraud.
- Synthetic fraud is a new form of identity theft in which a fraudster creates a false identity based on information from multiple sources.
- If you’re a victim of identity theft, you’re entitled to certain rights, such as a 90-day fraud alert from credit bureaus.
- Read more stories from Personal Finance Insider.
Identity theft sounds like a crime that happens to someone else. Yet, it’s ubiquitous and becomes a bigger issue every year. According to the Consumer Sentinel Network, reports of identity theft more than doubled from 650,000 in 2019 to nearly 1.4 million in 2020.
As more of our personal information ends up online, our identities are placed under greater risk of being stolen. Here’s how to prevent identity theft and how to report it in the case that you’re targeted.
What is identity theft?
Identity theft occurs when someone steals another person’s information either for financial gain or to assume that person’s identity. The Identity Theft and Assumption Deterrence Act of 1988 made identity theft a federal crime, though most cases are handled on the state level. Federal courts only get involved if a massive amount of money was stolen or if a fraudster was stealing multiple identities.
Because perpetrators of identity theft are acting under the victim’s identity, the victim can be held responsible for anything the perpetrator does. Paige Hanson, chief of cyber safety education at NortonLifeLock, says that because all of the fraudster’s activities were done under someone else’s identity, “we think of identity theft victims as guilty, and they have to prove themselves innocent.”
Types of identity theft
Identity theft can be done with several pieces of information to a number of different ends.
Financial identity theft: The most common type of identity theft, a fraudster uses your information for financial gain. This can be as simple as using your credit card information to make purchases online or in-person, but can go as far as using your social security number to open a new line of credit under your name. Not only does this hurt your finances, this can also hurt your credit score.
Note: Hanson recommends using a credit card to make purchases instead of a debit card, because credit cards have more protections in place. “If a fraudster went on a spending spree out of your debit card account and spent whatever the balance was, you’re left without any money until the bank reimburses you, which can be up to, you know, five to 10 business days,” she says.
Medical identity theft: This type of theft is when a fraudster uses your medical insurance information to get reimbursed for their medical expenses. Alternatively, an insurance holder can commit fraud by giving their insurance information to someone so that person doesn’t have to pay for their medical expenses. Medical providers may also commit fraud by claiming they performed medical procedures that never happened in order to get reimbursed.
Medical identity theft can hurt your credit, but can have more severe consequences if the fraudster’s actions create medical records under your name. This can lead to false medical information that may lead to complications during medical procedures.
Criminal identity theft: In these instances, the perpetrator committed a crime, something that can be as innocuous as a speeding ticket, and gives someone else’s information instead of their own, such as a driver’s license. So that person is held legally responsible for the perpetrator’s actions.
Child identity theft: Children are appealing targets for fraudsters because their credit history is a blank slate. If a person has a credit history that is associated with certain geographical areas, a fraudster attempting to open a new line of credit in that person’s name in a completely different area will set off red flags. Yet if someone doesn’t have a credit history, like a child, there’s no prior activity pattern that will trigger those red flags, so the fraud goes unnoticed.
These cases are usually instances of familiar fraud, where the victim knows the fraudster personally, usually a friend or family member. “In those cases, the young adult doesn’t necessarily want to press charges against their parents or aunts or uncles, somebody within their familiar circle. And so they’re left with poor credit,” Hanson says.
Synthetic identity fraud: Synthetic identity theft is a relatively new way to create a false identity by creating a profile using bits and pieces of other people’s information, making it hard to detect since this person doesn’t exist. A fraudster will start by stealing a social security number, then add false information around it, such as a fake name and fake address, until a whole fraudulent profile is created. Fraudsters can use this identity to build credit, take out a loan, and then disappear.
Though the identity is a mix of information from different people, Hanson says that the owner of the social security number is usually held accountable. “But it’s not necessarily on [their] credit report, because all of the other information wasn’t matching,” she says.
How to prevent identity theft
Hanson says that just being aware that identity theft is very possible is a good starting point towards prevention. However, oftentimes personal information leaks are out of our control. Fraudsters can access your information through a data breach from an online retailer or insurance company that leaks their clients’ personal information. Yet there are ways to prevent any significant damage towards you.
Keep your personal information secure: It’s important to closely guard your personal information and accounts, both online and on paper. This means practicing good security habits such as having a variety of passwords, not just the one that you use for everything, and properly disposing of trash that can contain sensitive or personal information by shredding it or crossing out the important details.
Sign up for ID theft protection: Unfortunately, personal information leaks are often out of our control. Fraudsters can access your information through a data breach from an online retailer or insurance company that leaks their clients’ personal information. Though we can maintain some security practices, the best thing to do is keep a watchful eye. An easy way to do this is signing up for an ID theft protection service that will monitor your information to see if anyone is using it and alert you if they detect potential fraud.
Regularly check your credit report: If you don’t enroll for ID theft protection, you can regularly check your credit report to see if there are any unauthorized lines of credit. You are entitled to a free credit report from each of the credit bureaus every 12 months.
Preventing child identity theft: To prevent your child’s identity from being stolen, you can open a line of credit in your child’s name then freeze their credit as long as they’re under the age of 16. Known as a security freeze, this restricts access to your child’s credit history
How to report identity theft
If you find that your credit score is fluctuating because of lines of credit that you didn’t open or you’re receiving collection notices on debt that you didn’t rack up, there’s a good chance that your identity has been stolen. Though it can be a harrowing experience, you have certain rights as a victim of identity theft. Here are several steps you need to take once you realize your identity has been stolen.
Report the fraud to relevant companies: The first thing you should do is notify the companies involved in the identity theft. For most cases, such as credit card fraud, you can report the fraud, dispute the charge, and get a new credit card. As long as you do that within the allotted time since the fraud occurred, usually 60-90 days though the earlier the better, that’s usually the end of it.
In most states, you are not liable for any new lines of credit opened as a result of the fraudulent activity. You also have the right to stop debt collectors from contacting you.
Create an identity theft report: An identity theft report can be useful documentation when you’re reclaiming your identity. Though you can report identity theft over the phone, you will only receive an identity theft report if you report it online.
Report fraud to credit bureaus: You need to call one of the credit bureaus that your identity has been stolen. The credit bureau you report it to is required by law to notify the other two bureaus.
While contacting your credit bureaus, you’re entitled to a 90-day initial fraud alert, which requires creditors to take reasonable steps to confirm the identity of the person applying for credit under your name. They also have to provide you with a free credit report and a summary of your rights along with the fraud alert. If you have an identity theft report, you can extend the fraud alert to seven years.
Even if someone has your social security number, this makes it difficult for them to use it. “Usually what we find is that [fraudsters] just move on to the next security number, because you’ve made it harder for them to just easily more freely use,” Hanson says.
Go to local law enforcement: There are certain instances in which you should go to your local law enforcement agent such as if you know the person who stole your identity. You should also report your identity theft to law enforcement if the fraudster passed your information off as theirs to the police. Lastly, certain companies may require a police report when you’re reporting fraud.
Acquire a new social security number: In extenuating circumstances, such as if your life is being threatened or if your social security number is constantly being used to steal your identity, you may be eligible for a new social security number. You can apply for a new one online through the Social Security Administration.