It can be scary for Americans to read about the large corporate data breaches that have made headlines this year. As of Oct. 10, 2017, the Identity Theft Resource Center has reported 1,080 breaches this year, affecting over 171 million records. Some of those affected have chosen to place a freeze or fraud alert on their credit reports, but often just as a short-term solution. Many people are now wondering how these data breaches will affect them in the long term.
The difference between a data breach and identity theft
When you've been notified your personal data has been breached, it's hard to know how to react. One analogy is to imagine a key to your house has been lost, and possibly stolen. If to happen, you would certainly want to change your locks as soon as possible -- and be on alert for any signs of potential intruders.
But losing a key is lot different from discovering that an intruder has entered your house. Once you've confirmed that someone has tried to use your personal information to commit identity theft, you are in a different place than merely finding out that your personal information might have been lost in a data breach. For example, you could learn criminals used stolen data to attempt to make purchases, open accounts or withdraw funds from your bank.
Just because tens of millions of people's records have been breached, it doesn't mean that all those people have been victims of identity theft, or ever will. If you know that you've actually become a victim of identity theft, there are several important actions that you can take. (See also: What Should You Do When Your Identity Is Stolen - Fraud Alert or Credit Freeze?)
But if you are simply worried about the long term effects of a data breach, then here are three steps to consider:
Monitor your credit history and look for new accounts
If you've been a victim of a data breach, you'll want to take extra precautions to monitor your credit history and check for new accounts that might have been opened without your authorization. Many companies that have been the subject of a data breach will offer affected consumers one year or more of free credit monitoring. Furthermore, all Americans are entitled to receive a free copy of their credit reports every 12 months from each credit reporting agency. To receive your reports, just go to AnnualCreditReport.com. Look for any signs of new accounts being opened in your name, or anyone trying to update your existing accounts to a new address. You can also check your Experian credit report for free at experian.com.
Another way to be alert for possible identity theft is to keep a close eye on your credit scores, which can be a way to quickly identify a potential problem with your credit. Thankfully, many credit cards now offer account holders a free monthly credit score. In addition, the Discover Card also provides its customers with free credit monitoring that will alert you any time a new account is opened in your name.
Keep track of your Social Security benefits
When your Social Security number has been exposed as part of a data breach, a criminal might attempt to fraudulently receive your Social Security benefits. For example, someone could try to file for new benefits in your name, or attempt to change the address that your current benefit checks are being sent to.
The best thing that you can do to prevent this type of fraud is to be extremely careful about any changes to your Social Security account information. For example, if you're receiving benefits and you miss a check, report it immediately and reconfirm the address it's being sent to.
Monitoring your tax returns
One of the most popular ways that criminals try to profit from stolen personal information is to fraudulently file tax returns. The phony returns will request a large refund be sent to a bank account or address the criminal has access to. A simple way to prevent someone from filing a fraudulent return in your name is to file yours early. That way, the IRS will flag the criminal's phony return as a duplicate. There's also an Identity Theft Affidavit (Form 14039) you can file with the IRS if you learn you are the victim of tax identity theft.
Beyond that, it's also important to keep a close eye on any correspondence you receive from the IRS or your state's department of revenue. Whenever a change of address request is received, it's standard practice to send a confirmation letter to the old address on file. If you didn't ask for a change of address, receiving one of these letters is a warning that someone has fraudulently done so. Finally, the IRS allows some taxpayers to set up a PIN before submitting a return or setting up alerts that notify you when a return is filed in your name. Currently, you may choose to get an IP PIN only if you've received an IRS letter inviting you to 'opt-in' to get one, or you've filed your federal tax return last year with an address in Florida, Georgia or the District of Columbia.
Other types of identity fraud
While your bank accounts, Social Security benefits and tax returns might be the largest targets of identity fraud, there are several other ways that criminals can attempt to gain from your personal information. For example, medical identity theft can occur when a person receives medical services while giving out your personal information for billing. While this type of fraud is difficult to prevent, you should be concerned any time you are sent bills for care you didn't receive.
Criminal identity theft occurs when someone gives out a false identity during arrest. Victims are sometimes stunned to find out they have a criminal record when they apply for a job, or have an interaction with law enforcement. Like medical identity fraud, there is little that you can do to prevent it, but it's important to react quickly when you suspect someone is identifying themselves to law enforcement using your personal information.
Driver's license identity theft can occur when your purse or wallet is stolen by someone who looks somewhat like you. Having a credible driver's license then allows the criminal to get away with many other types of fraud and identity theft.
The recent increase in data breaches shows the problem of identity theft isn't going away anytime soon. But ironically, many experts feel the sheer volume of stolen personal information makes it less likely that any affected individual will actually become the victim of identity theft. By taking additional precautions to recognize and prevent identity theft, you can minimize the long term impact of a data breach.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer, or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.