- Identity theft occurs when someone 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 are a victim of identity theft, you are entitled to certain rights, such as a 90-day fraud alert from the credit bureaus.
- Read more stories from Personal Finance Insider.
Identity theft is like a crime that happens to someone else. Yet it is ubiquitous and becoming a bigger problem 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 and more of our personal information ends up online, our identities are at greater risk of being stolen. Here’s how to prevent identity theft and how to report it if you’re targeted.
What is identity theft?
Identity theft occurs when someone steals another person’s information, either for financial gain or to impersonate that person. The Identity Theft and Deterrence of Assumption Act of 1988 made identity theft a federal crime, although most cases are handled at the state level. Federal courts only get involved if a huge sum of money has been stolen or if a fraudster has stolen multiple identities.
Because identity theft perpetrators act under the identity of the victim, the victim can be held liable for anything the perpetrator does. Paige Hanson, cybersecurity education manager at NortonLifeLock, says that because all of the fraudster’s activities were carried out under someone else’s identity, “we view identity theft victims as guilty and they must prove their innocence”.
Types of Identity Theft
Identity theft can be done with multiple pieces of information for a number of different purposes.
Financial identity theft: The most common type of identity theft, a fraudster uses your information for financial gain. It can be as simple as using your credit card information to make purchases online or in person, to using your social security number to open a new line of credit in your name. Not only does this hurt your finances, but it can also hurt your credit score.
To 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 has gone on a spending spree on your debit card account and spent the balance, you’re left with no money until the bank pays you back, which can take up to, you know, five to ten business days,” she says.
Medical identity theft: This type of theft occurs when a fraudster uses your medical insurance information to claim reimbursement for medical expenses. Alternatively, an insurance holder may commit fraud by giving their insurance information to someone so that person does not have to pay their medical bills. Medical providers can also commit fraud by claiming that they performed medical procedures that never took place in order to be reimbursed.
Medical identity theft can hurt your credit, but can have more serious consequences if the fraudster’s actions create medical records in your name. This can lead to false medical information that can lead to complications during medical procedures.
Criminal identity theft: In these cases, the perpetrator has committed a crime, something that can be as harmless as speeding, and is giving someone else’s information instead of their own, like a driver’s license. Thus, this person is held legally responsible for the acts of the author.
Child Impersonation: Children are attractive targets for fraudsters because their credit history is a blank slate. If a person has a credit history associated with certain geographic 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 has no credit history, like a child, there is no prior activity pattern that will trigger those red flags, so the fraud goes unnoticed.
These cases are usually familiar fraud cases, where the victim knows the fraudster personally, usually a friend or family member. “In these cases, the young adult doesn’t necessarily want to press charges against their parents, aunts or uncles, someone in their familiar circle. And so they end up with poor credit,” says Hanson.
Synthetic impersonation: Synthetic spoofing is a relatively new way to create a false identity by creating a profile using other people’s bits of information, making it difficult to detect since that person does not exist. A fraudster will start by stealing a social security number, then add fake information around it, like a fake name and address, until a whole fraudulent profile is created. Fraudsters can use this identity to build credit, take out a loan, and then disappear.
Although identity is a mix of information from different people, Hanson says the owner of the social security number is usually held accountable. “But it’s not necessarily about [their] credit report because all the other information didn’t match,” she said.
How to prevent identity theft
Hanson says just being aware that identity theft is very possible is a good start towards prevention. However, leaks of personal information are often beyond our control. Fraudsters can access your information through a data breach from an online retailer or insurance company that leaks their customers’ personal information. Still, there are ways to prevent any significant harm to you.
Protect your personal information: It is important to closely protect your personal information and accounts, both online and in print. This means adopting good security habits, such as having a variety of passwords, not just the one you use for everything, and properly disposing of trash that may contain sensitive or personal information by shredding it or crossing out important details.
Sign up for Identity Theft Protection: Unfortunately, leaks of personal information are often beyond our control. Fraudsters can access your information through a data breach from an online retailer or insurance company that leaks their customers’ personal information. Although we may maintain certain security practices, the best thing to do is to keep a watchful eye. An easy way to do this is to sign up for an identity theft protection service that will monitor your information to see if someone is using it and alert you if they detect potential fraud.
Check your credit report regularly: If you don’t have identity theft protection, you can check your credit report regularly 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 and then freeze their credit while they are under 16. Known as a security freeze, this limits access to your child’s credit history.
How to report identity theft
If you find your credit score fluctuating due to lines of credit you haven’t opened or you’re receiving collection notices for debts you haven’t accrued, chances are your identity has been been usurped. Although it can be a harrowing experience, you have certain rights as a victim of identity theft. Here are several steps you should take once you realize your identity has been stolen.
Report the fraud to the relevant companies: The first thing to do is notify the companies involved in identity theft. In most cases, like credit card fraud, you can report the fraud, dispute the charge, and get a new credit card. As long as you do it within the time frame since the fraud, usually 60-90 days, although the sooner the better, that’s usually the end of it.
In most states, you are not responsible for new lines of credit opened as a result of fraudulent activity. You also have the right to prevent debt collectors from contacting you.
Create an impersonation report: An identity theft report can be helpful documentation when recovering your identity. Although you can report identity theft over the phone, you will only receive an identity theft report if you report it online.
Report the fraud to the credit bureaus: You must 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.
When you contact your credit bureaus, you are entitled to an initial 90-day fraud alert, which requires creditors to take reasonable steps to confirm the identity of the person applying for credit on your behalf. They must also provide you with a free credit report and a summary of your rights as well as 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, it makes it difficult to use it. “Generally what we find is that [fraudsters] just move on to the next security number because you’ve made it harder for them to use it easier and freer,” says Hanson.
Contact local law enforcement: In some cases you should contact your local law enforcement officer, for example 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 on to the police as their own. Finally, some companies may require a police report when you report fraud.
Get a new social security number: In extenuating circumstances, such as if your life is threatened or if your social security number is constantly used to impersonate you, you may be entitled to a new social security number. You can apply for a new one online through the Social Security Administration.