What Is Identity Theft?

Quick Answer

Identity theft occurs when someone steals your personal information and uses it to steal your money, open credit accounts, file tax returns, make health insurance claims and more without your consent. Fortunately, there are many things you can do to protect yourself.

A man and a woman working on computers in a dark, industrial room.

Identity theft is when someone steals your personal information and uses it without your permission. Fraudsters may use your information to access your financial accounts, open bank and credit card accounts, file tax returns and more. In 2023 alone, the Federal Trade Commission (FTC) received more than 1 million reports of identity theft.

There's no way to inoculate yourself against identity theft completely. But if you're diligent in learning how your information can be at risk and what fraudsters can do with it, you'll be better equipped to protect your data and act quickly if someone does manage to steal it.

What Is Identity Theft?

Identity theft is a broad term that applies anytime someone steals your personal or financial information and uses it without your permission.

Identity thieves may attempt to steal many types of your information, including your:

  • Name and address
  • Driver's license, passport or Social Security number
  • Credit card or bank account numbers
  • Health insurance account numbers

Due to the nature of technology and the internet, your personal information is always at risk. If you're not carefully monitoring your credit file, you may not notice you've been victimized until the damage is already done.

Types of Identity Theft

Three of the most common types of identity theft are financial, medical and child identity theft. Within each of those categories, there are different ways a criminal can take advantage of you.

Financial Identity Theft

Financial identity theft involves unauthorized access to existing financial accounts or the creation of new accounts in your name.

For example, a thief may steal your wallet or purse and use your credit card to make purchases, obtain your bank account details and drain your accounts, or get ahold of your Social Security number and open a new credit card in your name or file a fraudulent tax return.

Medical Identity Theft

With medical identity theft, a criminal may see a health care provider, buy prescription drugs or medical devices and submit insurance claims to Medicare or your health insurance company without your permission.

Typically, medical identity theft occurs if a criminal gets their hands on your personal information, such as your name, Social Security number and health insurance ID.

Child Identity Theft

Identity thieves engage in child identity theft when they use the personal information of a minor to obtain credit, find employment or engage in other illegal activities in the child's name.

Child identity theft can be particularly pernicious because children typically have no need to check their credit reports. As a result, it can go undetected for several years.

Learn more >> 20 Different Types of Identity Theft and Fraud

How Does Identity Theft Happen?

There are several different ways identity thieves can get ahold of your personal and financial information. Here are some of the most commonly used methods:

  • Data breaches: A data breach happens when someone gains access to an organization's consumer data without authorization. The most common types of information stolen in data breaches include full names, Social Security numbers and credit card numbers.
  • Unsecure browsing: For the most part, you can browse the internet safely, especially if you stick to well-known websites. But if you share any information on an unsecure website or a website that's been compromised by hackers, you could be putting your sensitive information directly in the hands of a thief.
  • Dark web marketplaces: The dark web is a hidden network of websites that aren't accessible by normal browsers. People who visit the dark web use special software to mask their identities and activity, making it a haven for fraudsters. Hackers may steal your information and sell it on the dark web rather than using it for themselves.
  • Malware: Malware is malicious software that's designed to wreak all sorts of havoc. Fraudsters may use malware to steal your data or spy on your computer activity without you knowing.
  • Credit card theft: If a thief can gain access to your credit card information, they can use it to make unauthorized purchases. Common ways credit card theft occurs are through data breaches, physical theft, credit card skimmers and online retail accounts where card information is stored.
  • Mail theft: Since long before the internet, identity thieves have been combing through the mail to find documents that hold personal information. Bank and credit card statements and any other document you send or receive through the postal system can be intercepted and used to gain access to your data.
  • Phishing and spam attacks: Some scammers use email, text messages and other forms of electronic communication to steal your sensitive information. The phishing message often looks like it's coming from a reputable source and asks victims to open a malware-infected attachment or to visit a spoof website and give up one or more types of information.
  • Wi-Fi hacking: If you use your computer or phone on a public network—airport, department store or coffee shop Wi-Fi, for example—hackers may be able to eavesdrop on your connection. If you type in a password, bank account or credit card number, Social Security number or anything else, an eavesdropper can easily intercept it and use it for their own purposes.
  • Mobile phone theft: Smartphones are a treasure trove of information for identity thieves, especially if your apps allow you to log in without a passcode or biometric authorization. If someone manages to steal and unlock your phone, it could allow them to view the information found in your apps, as well as in your emails, text messages, notes and more.

Learn more >> 10 Warning Signs of Identity Theft

How Do I Know if My Identity Has Been Stolen?

Depending on the type of identity theft, there may or may not be immediate or blatant signs that you've been victimized. That said, here are some common indicators of potential identity theft:

  • Credit card charges or bank account withdrawals you don't recognize
  • An unfamiliar credit account on your credit reports
  • Bills for an account you didn't open
  • Collection calls for a debt you don't owe
  • Recent credit inquiries when you haven't recently applied for credit
  • A sudden drop in your credit score
  • Unfamiliar medical bills or explanation of benefits letters
  • Expected mail goes missing
  • Duplicate return alert when filing your tax return

Learn more >> How to Check for Identity Theft

How Identity Theft Can Affect You

There are several different ways identity theft can impact your credit and financial situation, and in some cases, the ramifications can be severe. Here are just a few examples.

Potential Effects of Identity Theft
Actions Identity Thieves Take How It Affects You
Open fraudulent credit cards in your name Your credit suffers as the thieves rack up debt in your name
Access your financial accounts Your credit card or bank account is used to make unauthorized charges or withdrawals
File phony health insurance claims You receive medical bills for services you haven't received or are potentially denied treatment
File fraudulent tax returns Your tax refund is delayed
Obtain employment using your information You're liable for taxes on income you didn't receive
Steal your child's identity Your child's credit is ruined

What to Do if Your Identity Is Stolen

If you have even an inkling that you've fallen victim to identity theft, the most important thing to do is to limit the potential damage. The steps you'll take can vary based on the type of fraud committed, but here are some general guidelines for what to do if your identity is stolen:

  1. Contact your bank or credit card issuer. Whether or not you have confirmation that your account information has been compromised, contact your credit card issuers and bank immediately. You may be able to lock your accounts to prevent the identity thief from accessing them; also be sure to report unauthorized purchases, if applicable.
  2. Review your credit reports. Double-check your credit reports with the three credit bureaus (Experian, TransUnion and Equifax) to confirm any type of unusual activity and get help dealing with the theft. You have the right to dispute fraudulent accounts directly with the credit bureaus.
  3. File an identity theft report. Reach out to the FTC to file a report. The agency will provide steps you need to take and paperwork to file reports—including how to deal with police reports—and help you dispute fraudulent charges.
  4. File a police report. Remember, identity theft is a crime, so it's also a good idea to contact your local law enforcement agency and report it. While local authorities may not be able to do much, they can take reports and be on the alert for suspicious behavior that could involve your name or address.
  5. Freeze your credit or set up a fraud alert. If you find something is amiss on your credit reports, you have the right to freeze your credit report or set up a fraud alert, which notifies lenders that you've been a victim of identity theft so they can take extra measures to verify your identity when they get an application for credit in your name.
  6. Protect your child's identity. If you suspect your child is a victim of identity theft, you can check if your child has a credit report. Then you can consider adding a fraud alert or security freeze to protect them.

Being a victim of identity theft is a harrowing experience. It can take months and many hours of filling out forms and working with agencies and businesses to recover your identity once it is stolen. As such, it's important to be alert and to respond promptly when you believe identity theft has occurred.

How to Protect Yourself from Identity Theft

Remember, there's no surefire way to prevent all forms of identity theft completely, but there are some steps you can take to make it harder for criminals to access your information and use it for nefarious purposes.

Here are some tips on how to protect yourself from identity theft.

Safeguard Your Devices

Use a non-generic passcode and biometric authorization, such as fingerprint or facial recognition software, to secure your mobile devices and computers.

Also, be sure to routinely check for and install regular software updates to your devices. Updates include software patches designed to close up weak points in security, so putting off updates can leave you vulnerable.

Use a Password Manager

These days it's not uncommon for people to have online accounts with hundreds of different websites. A password manager not only makes it so you don't have to remember individual passwords but also ensures that your login credentials for each account are strong and unique.

Protect Personal Documents

If possible, opt for electronic statements instead of paper statements on all of your accounts so you don't risk leaving sensitive information in your mailbox. Also, be sure to check your mail daily instead of leaving it exposed for days, and shred any documents that contain personal details once you no longer need them.

Watch Out for Phishing Scams

If you receive an email or text message saying you owe money, telling you to open an attachment or asking for personal information, be skeptical. Check the sender's email address and the URL, and do not click any links in the message. If you think the message may be legitimate, contact the company separately using contact information on a bill or the company's website.

Don't Share Information Over the Phone

If someone calls you and asks for personal or financial information, it could be a sure sign of fraud. Before providing any details, ask the caller for a callback number, then search for it online to see if it matches the customer service number of the company supposedly calling you. Keep in mind, the IRS and other government authorities will not call you and ask for your personal information over the phone.

Check Your Credit Reports Regularly

With Experian's free credit monitoring service, you can get real-time alerts when changes are made to your Experian credit report. You'll also get free access to check your FICO® Score and Experian credit report anytime, making it easier to watch out for unfamiliar activity.

Be Vigilant When Online

When using public Wi-Fi networks, consider using a virtual private network (VPN) to keep your internet connection private and secure. Also, if you're visiting a website, check the URL to see if it's secure—the URL should start with HTTPS. Even if it's secure, though, research websites you don't recognize to find out if they're legitimate.

Consider Identity Theft Protection Services

If you want an extra level of protection against identity theft, consider signing up for an identity theft protection service. These services can add an extra level of protection and help you spot possible signs of identity theft early. Experian's identity theft protection service offers identity theft monitoring, dark web surveillance, assistance with fraud and ID theft insurance, among other features.

Diligence Pays Off

Recognizing the signs of identity theft and taking steps to prevent it can save you heartache, stress and loss.

As you monitor your credit regularly, watch out for suspicious transactions, accounts and notifications, and act fast when something is off. If you're diligent, you'll be in a better position to catch identity theft early before it ruins more than just your day.

Learn More About Identity Theft