Protecting yourself from identity theft starts with a solid understanding of what identity theft actually is, and ultimately means coming up with a forward-thinking plan that aims to wall off identity thieves from your personal data. Unfortunately, too many Americans don't take the steps necessary to effectively guard against identity theft.
According to a study by Experian, only 18% of U.S. adults use a paid credit monitoring product to protect their identities, and 13% use one to monitor their credit and finances. Additionally, 81% stated they rely on their banks and credit card companies to take responsibility for thwarting identity theft.
Identity thieves are only too happy for fraud targets to be dependent on others to protect their identity. Here's how to prevent that from happening to you.
What Is Identity Theft?
The first big step in protecting yourself from identity theft is awareness—and that means being able to define and recognize identity thef.
Identity theft, also referred to as identity fraud by law enforcement officials, is defined as all crimes against individuals where personal and financial data is illegally obtained by fraud or deception, usually for financial gain.
Once identity thieves steal your identity, some things they can do include:
- Applying for credit cards or loans in your name.
- Withdrawing funds from your bank account.
- Using your health insurance to obtain medical care.
- Using your Social Security number to steal your tax refund.
- Selling your information on the dark web to other criminals.
The issue of identity theft has become so prevalent in recent years that the U.S. government has made identity theft a federal crime, punishable by imprisonment of up to two years for general identity theft crimes and up to five years for terrorism-based identity theft crimes.
There are many types of identity theft that impact consumers—the most common being credit card fraud, employment or tax-related fraud, phone or utility fraud, and bank fraud (according to the FTC).
How to Recognize Signs of Identity Theft
To better prevent identity theft, know the warning signs that signal fraud is developing—or is happening already:
1. You No Longer Get Your Household Bills in the Mail
An absence of bills in the mail could mean your personal data has been compromised, and the identity thief has changed your billing address.
2. You Are Turned Down for a Loan or Credit
If you're rejected for credit, but have a history of good credit health, you might have been targeted by an identity thief. If you're approved for a loan or credit, but at higher interest rates, that's also a sign you may have been victimized by identity theft.
3. You Are Being Billed for Purchases You Didn't Buy
Invoices for purchases you don't recognize, or if you're being billed for overdue payments for credit accounts you don't own, that's a sign you've been victimized by I.D. fraud.
4. Your Financial Accounts Have Transactions That Appear Fraudulent
If your bank, credit card or other financial account show unauthorized transactions, those accounts may have been breached.
5. Your Tax Return Is Rejected
If you filed your tax returns and received a rejection notice from the Internal Revenue Service, that could indicate a return has been fraudulently filed in your name.
6. Test Charges Appear on Your Credit Card Statement
It's common practice for identity thieves to "test" that a stolen card is still active by making low-cost purchases of under $5.00. If the credit card is approved, the fraudster knows that the path is clear for larger transactions.
Steps to Protect Yourself from Identity Theft
To better protect your personal data against identity thieves, take some forward-thinking steps that minimize your odds of being victimized. The goal is to build as many effective obstacles and tripwires as you can with your personal data. That strategy will frustrate and discourage identity thieves and drive them toward other targets whose data is easier to fraudulently obtain.
Start that process with these eight steps:
1. Go "All in" on Using Passwords
For starters, you do need passwords to protect your data—even though many Americans don't see it that way. According to an Experian study, 50% of Americans don't have all their digital devices password-protected. 30% of that group says setting up passwords are a "hassle" while 25% say it's not necessary." The fact is, not having a password on your computer or smartphone, and on all financial accounts, too, is akin to leaving your home with the door wide open. Consequently, always use passwords, and the stronger the password, the better.
2. Mix up Your Passwords
Identity thieves are counting on the fact that you'll use the same password for all of your electronic devices and for your key financial accounts. Once a fraudster obtains a single password, access to the rest of your accounts is easy to accomplish, if every password is the same.
Stop an identity thief from accessing your data by mixing up passwords. Don't include your name in any passwords or your birthday, and change your password anytime you suspect an account is compromised.
3. Stay Away From Shady Websites and Links
Avoid clicking on any suspicious-looking links in emails or text messages. Identity thieves routinely use emails and websites that look similar to your bank, credit card company, mortgage lender, or other financial institution. If you suspect a link isn't legitimate, don't click on it, and never type in your username or password on an unfamiliar login screen.
4. Never Give Out Personal Information
Fraudsters may also regularly pose as a bank or credit card company employee over the phone, but doing so should be a dead giveaway. The fact is, no legitimate organization will call and ask you for personal information—like a bank or credit card PIN number or Social Security number.
If you suspect a call is potentially legitimate, ask for the caller's credentials, hang up, and contact the organization using the phone number listed on your financial institution's bank statements. Also note that the I.R.S. will never call you on the phone — it always sends taxpayer requests and information via U.S. mail.
5. Regularly Check Your Credit Reports
Credit reports will include any suspicious activity on your financial accounts. As a result, check your credit report regularly for any discrepancies. You can get a free Experian credit report and can get a free credit report from each of the credit bureaus every 12 months on AnnualCreditReport.com.
6. Establish Fraud Alerts if Needed
If you suspect your identity has been stolen, you can contact Experian to set up a fraud alert. Experian will notify the other bureaus of the fraud alert. Also, if you're a member of Experian CreditWorks or Experian IdentityWorks, you can lock your Experian credit file with Experian CreditLock. With fraud alerts, financial services or data security companies normally text or place a phone call to consumers if there is a suspected security breach or if spending on a card or account doesn't match up with your habits or recent location.
7. Protect Documents With Personal Information
It's also a good idea to destroy any physical private records and statements that include any personal and/or financial data (a good shredder only costs $20 to $30). Don't leave mail in your mailbox as identity thieves may still steal from mailboxes or trash to get your information.
In general, it's also helpful to avoid leaving a paper trail of ATM, credit card or retail receipts behind. Identity thieves can use receipts to help piece together your personal data, so hold on to receipts and throw them away or shred them when you get home.
8. Limit Your Exposure
It's a good idea to limit the number of credit cards you carry in your wallet, so if it's stolen you can minimize the impact. Additionally, don't carry your Social Security card on your person — the theft of a Social Security number is an ID theft's gateway to more financial accounts, and thus must be protected at all costs.
Be Vigilant with Identity Theft Fraud Protection
The takeaway? Never take the security of your personal data for granted. Data thieves are out there, ready to strike. Chances are, they'll target those consumers deemed to be most unprepared and most vulnerable because that's where the financial opportunity lies for crooks.
Consequently, it's up to you to stop identity theft from occurring—one strong identity theft protection step at a time.
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.