What is Identity Theft and How did it Become Such a Big Problem?

Identity Fraud
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Identity Theft: How to Protect Yourself

There are countless ways criminals can steal your identity. Your best defense against becoming a victim is to take steps to ensure your private information is not easy to obtain in the first place.

  • Secure your accounts with strong passwords. Using a password manager is an easy way to do this.
  • Keep your sensitive information private. Don’t post confidential information on social media; encrypt your information on shared computers; and wipe any device clean before selling it.
  • Don’t share private information over the phone. Your bank will never call asking for login credentials or your social security number.
  • Protect your online activities with a VPN. A virtual private network encrypts all the data you send over the internet, protecting it from hackers.
  • Subscribe to an identity theft monitoring service. Although expensive, these services can quickly alert you to potential identity theft.

If you do find yourself the victim of identity theft or want to know how to keep yourself safe, read our complete guide below to find out how identity theft happens, the steps criminals take to steal your good credit, and what to do if it happens to you.

More than 2.2 million Americans reported they were the victims of identity theft in 2020, according to the U.S. Federal Trade Commission. The numbers weren’t much better in Europe, where one in five Europeans report being the victim of identity theft, making this the second most common type of fraud in the EU.

Most often, criminals target vulnerable groups—children and seniors—to obtain the information required to adopt someone else’s identity. However, anyone can fall victim to identity theft.

Read on to understand how identity theft happens, what strategies will help you avoid becoming a victim, and what to do if identity theft happens to you.

What is Identity Theft?

Identity theft, also known as identity fraud, occurs anytime an imposter obtains personally-identifying information from someone else. They then use that information to steal money, obtain credit, hide their own identity, receive services, or even get a job.

There are many ways criminals can steal your identity.

Types of Credit Identity Theft

TypeDescriptionPrimary Targeted Information
Account TakeoverA criminal obtains access to your accounts and begins using them as their own. They might change your email and mailing addresses on the accounts so you don’t become aware of the problem right away. This gives them plenty of time to make purchases and run up a big bill before you realize what’s going on.Login Credentials
True Name Identity TheftA criminal fully adopts your persona and pretends to be you. They open accounts, obtain loans, etc., all in your name. With the advent of credit monitoring, fraud alerts, and credit freezes, this type of identity theft is on the decline, but it still exists.Social Security Number
Synthetic Identity TheftA criminal takes your social security number and combines it with a fake name, address, and birth date to create an entirely new persona. They use this to open accounts, get credit cards, and purchase goods and services. This is the fastest-growing type of identity theft since it is very hard to trace.Social Security Number

Types of Non-Credit Identity Theft

TypeDescriptionPrimary Targeted Information
Medical Identity TheftA criminal will impersonate you to obtain medical services. This results in incorrect medical information being tied to you, which can negatively impact your ability to obtain health coverage down the road. Since this is a non-credit theft, monitoring your credit report won’t identify the issue unless and until unpaid medical bills show up.Health Insurance Member Number
Criminal Identity TheftA criminal will have fake identification cards made with your name and their photo. They present this ID to law enforcement. This type of non-credit theft will never show up on your credit report, making it difficult to detect. Usually, you discover it after being stopped for a routine traffic violation and discover there are outstanding warrants in your name.Driver’s License Number
IRS Identity TheftA criminal files a tax return using your social security number but not your name. You usually won’t discover this until the IRS sends you a notice about multiple returns filed under your social security number. Another form of non-credit theft, this is difficult to detect until the IRS contacts you.Social Security Number

How Do Criminals Get Your Info?

There are many ways the bad guys can get your personal information.

  • Mail Theft. A thief will take unopened mail out of your own mailbox or an unsecured public mailbox where you deposited envelopes for mailing.
  • Dumpster Diving. Criminals will comb through the bags and cans you set out for garbage collection, taking anything that contains your personal information.
  • Shoulder Surfing. Just like it sounds, a criminal will obtain your confidential information by watching you over your shoulder while you enter data into your computer, phone, or other devices in a public place.
  • Phishing. Thieves will trick you into divulging your confidential information, either by having you enter data into a fake form or click on a link that downloads malware to your device.
  • Hacking. Criminals will intercept your internet traffic via Man in the Middle (MITM) attacks. This can happen on your home network, the connection between your internet provider and a website, or—most commonly—when you use public Wi-Fi. Hackers often set up fake Wi-Fi networks in coffee shops, airports, or train stations. These look just like a real public Wi-Fi network. However, when you connect to these fake networks, the criminals can begin monitoring everything you do on your device.

How to Protect Yourself from Identity Theft

While there’s no way to guarantee that you’ll never be an identity theft victim, there are strategies you can take that will greatly reduce the possibility.

Secure your account with strong passwords

Don’t get lazy and re-use the same password for multiple online accounts. Using the same password for all your accounts and devices might be easy to recall, but it’s also very dangerous. If a criminal identifies your login credentials for one account, they can easily gain access to all your accounts.

Always use a unique, complex password on each account. There are password manager apps designed to help you create and manage all your different passwords. You can also use the in-browser password manager that comes with your favorite browser. Each option has its pros and cons, but both help you create and remember strong passwords for your accounts.

Handle sensitive information carefully

Always handle your devices and your sensitive information carefully. Delete all your information from a device before selling it. If you share your computer with others, make sure your sensitive information is encrypted so only you have access to it.

Don’t put your personal information on social media. Even if you have your privacy settings locked down, you never know how secure your friends’ accounts are.

If you need to fill in personal information online, always verify that you are dealing with a legitimate business and not a malicious website impersonating that business.

Don’t share personal information with third parties

Never share personal information with third parties. Some criminals will call you pretending to be from your bank and try to get your information over the phone. They will ask for personal information, like your social security number or maybe your password or PIN code. Do not provide any information over the phone. Ever.

If you are unsure about a situation, hang up and call your bank to report the incident. Chances are, your bank will tell you it was a fraud attempt. Banks, credit card companies, and other financial institutions all state they will never contact you by phone to obtain your personal information.

Subscribe to an identity theft-monitoring service

There are numerous services that promise to protect you against identity theft. They also often come with hefty price tags for their services. Some of the biggest names in the industry include Lifelock, IdentityForce, and Identity Guard.

These services offer varying tiers of protection, with credit report and social security number monitoring included in each service’s basic level of coverage. If you want additional monitoring for non-credit forms of identity theft, you’ll need to subscribe to a higher tier of service. Our LifeLock review goes into greater detail about this service as well.

While not everyone will see the need for a monitoring service, it’s an option that exists to provide additional security. For those with the means to pay for such a service, it provides additional peace of mind.

Protect your online activity

One of the easiest ways to keep your sensitive data private is by using a Virtual Private Network (VPN). A VPN encrypts all of the information you send across the internet, protecting it from the prying eyes of hackers.

With a VPN, you can use public Wi-Fi networks without worrying your information might be stolen. Take a look at our overview of the best VPN providers to find the best option for you.

If you’d rather start using a VPN right away, our top recommendation is ExpressVPN. It’s fast, has servers located in the most number countries of any VPN provider, and offers a 30-day money-back guarantee.

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How Do You Know You’re a Victim of Identity Theft?

Unfortunately, it can be hard to figure out immediately that you’re the victim of identity theft. If you’re not monitoring your credit report often, you may not find out until something dramatic happens.

Even if you do review your credit report annually, some types of identity theft will never show up there.

Shocking ways to discover identity theft

Sometimes, you discover identity theft in shocking ways, like when you:

  • Apply for a loan or credit and are denied due to a low credit score
  • Fail an employment background check
  • Get arrested during a routine traffic stop because of an outstanding warrant (which isn’t yours)
  • Are denied health insurance due to a preexisting condition (that you don’t have)
  • Receive an IRS notification about multiple tax returns filed under your social security number
  • Are contacted by a debt collector, demanding payment (for a debt you don’t owe)

Subtle ways to discover identity theft

There are other, less dramatic ways, too. Such as when you:

  • See accounts and activity on your credit report that are not yours
  • Notice bank account withdrawals you didn’t make
  • Stop getting bank or credit card statements and other mail that contains personal information
  • Receive delivery notifications or invoices for orders you didn’t make
  • Get emails alerting you to unusual account activity

What to Do if You’re an Identity Theft Victim

After you get over the initial shock, you’ll need to take steps to repair the damage done and protect yourself down the road.

Be sure to keep detailed notes about everything you do related to the theft. You may need to reference that information later.

Reporting identity theft in the United States

If you encounter identity fraud in America, here’s how to report your situation.

  1. Check all your financial accounts. Close or put a freeze on any accounts that show suspicious activity.
  2. Log in and change your passwords on all financial accounts as fast as possible. If you can no longer access an account, call customer support, explain the situation, and find out what to do next.
  3. Contact one of the three major credit reporting agencies, TransUnion, Equifax, or Experian, and put a free, one-year fraud alert on your account. The agency you contact will notify the other two agencies on your behalf. A fraud alert will entitle you to free credit reports from all three agencies. If you identify any accounts you didn’t open on your credit report, contact the companies and close those accounts.
  4. Report the theft on the Federal Trade Commission’s Identity Theft website. The website will walk you through building a step-by-step recovery plan and will also issue an Identity Theft Report. Financial institutions or other companies may ask you to show this report as proof of your claim.
    FTC Identity Theft Website Landing Page
  5. File a local police report. While the police most likely won’t investigate, you may need to show proof of filing a report to third parties to support your claim.
  6. Run anti-virus software on all computers and devices used to access online accounts.
  7. Respond to debt collectors within 30 days. First, dispute the debt and tell them about your identity theft situation. Second, contact the company they are trying to collect the debt for. Sample letters are available on the FTC’s Identity Theft website.
  8. Review your credit reports often to identify issues as quickly as possible. You are entitled to a free credit report from all three agencies at least once per year.

Reporting identity theft in the European Union

If you’re a European citizen who falls victim to identity theft, how you report the crime will vary depending on where you live. Each country has its own procedures for handling identity theft.

Start by visiting Europol’s website to report cybercrime online. Once there, you can follow a link to your country for further instructions.

Europol Identity Theft Reporting Page

Reporting identity theft elsewhere

Identity theft happens everywhere. If you live somewhere other than the United States, the European Union, or the United Kingdom, report your crime to your local police department. They will provide more information on the next steps to take.

Final Thoughts

In today’s world, more and more transactions are completed online every day. This increased online activity puts your confidential information at greater risk than ever before.

Taking steps to ensure your safety and protect your identity requires vigilance. Quickly identifying fraud helps minimize the damage inflicted by unscrupulous bad guys.

While identity theft will likely never be 100% eradicated, there are things you can do today to greatly mitigate your risk of becoming a victim.

Frequently Asked Questions about Identity Theft

Didn’t find what you were looking for in the article? Here are some of the questions we get most often about identity theft.

When it happens to you or a family member, there are three places where you should immediately report identity theft:

  1. One of the three major credit reporting agencies (Equifax, Experian, and TransUnion). You’ll want to immediately put a Fraud Alert on your account. You only need to contact one agency. They will automatically notify the other two.
  2. The Federal Trade Commission’s Identity Fraud website. The site will walk you through the steps to take, which vary depending on the type of identity fraud you’ve experienced.
  3. Your local police department. While they usually won’t conduct an investigation, you may need proof of filing a police report to show third parties later on.

If you’re a European citizen who falls victim to identity theft, how you report the crime will vary depending on where you live. Each country has its own procedures for handling identity theft.

Start by visiting Europol’s Report Cybercrime Online website. Once there, you can follow a link to your specific country for further instructions.

If you believe your social security number has been compromised, you will want to contact the Social Security Administration as soon as possible.

Start by reviewing your social security work history via your personal account on the social security website. If you note errors, you should contact your local social security office for further advice.

If you receive an IRS notice in the mail that says someone else filed a tax return using your social security number, follow the instructions contained in the letter. If the letter notes an employer, contact that employer directly, notifying them that someone stole your identity.

You should also complete an IRS Identity Theft Affidavit (Form 14039), available on the IRS website. The IRS also maintains an identity theft hotline at (800) 908-4490.

There are companies out there who make it their business to monitor websites and databases to detect identity fraud of all types. Some of the biggest names include Lifelock, IdentityForce, and Identity Guard. Each of these services offers different levels of monitoring protection for their customers at different price points.

Even if you are vigilant in monitoring your own credit report, there are some types of non-credit identity theft that won’t be detectable with a credit report review, such as criminal and medical identity theft. These monitoring agencies offer the ability to look for these situations and offer protection beyond what you can do yourself.

Author
Tech journalist
Tove has been working for VPNoverview since 2017 as a journalist covering cybersecurity and privacy developments. She has broad experience developing rigorous VPN testing procedures and protocols for our VPN review section and has tested dozens of VPNs over the years.
Author
Tech journalist
Liz is a professional writer with a special interest in online privacy and cybersecurity. As a US expat who travels and works in diverse locations around the world, keeping up with the latest internet safety best practices remains her priority.