What You Need to Know About Identity Theft and Fraud

As a responsible adult, you lock your doors at night, change the batteries in your smoke alarm twice a year, and inspect your roof each summer—all to help ensure the safety and security of your physical environment. But have you considered that your digital environment also requires its own set of housekeeping and preventative maintenance practices?

Those practices can help protect against a growing threat: identity theft and fraud. Identity theft is the process of acquiring someone else’s personal information for criminal purposes, whereas identity fraud is the deceptive use of that information to commit financial fraud.

Your identity can be stolen directly from physical documents, such as your mail (taken directly from your mailbox or by “dumpster diving”—searching through trash for information, such as bank account statements, that can be used to identify and impersonate you), or by using more sophisticated techniques. These include:

• Skimming: illegally capturing and storing bank or credit card information
• Phishing: masquerading as a trustworthy entity to elicit personal information via an electronic communication (usually email)
• Hacking: exploiting weaknesses in a computer system or network to steal personal information

If you use a personal computer, you are also at risk from “spyware” and viruses that can be designed to help thieves acquire your personal information and send it electronically to another entity without your consent.

Who Is at Risk for Identity Theft?

According to the most recent data posted by the Bureau of Justice, about 23.9 million people, or 9% of U.S. residents age 16 or older, were victims of at least one incidence of identity theft in 2021—an alarming figure that keeps climbing year over year.

And while anyone can be a casualty of identity theft, the rate of identity theft for the 50-64 population is 11% higher than all persons in all other age groups, and the 65+ population is not that far behind.

Why Is Identity Theft a Problem?

Once a scam artist has what they need to impersonate you online, you are exposed to financial risks that may far exceed the scale and the scope of some of the other risks you take steps to protect yourself against, such as a roof replacement or a basement flood.

This is because thieves can use your identity to acquire direct access to both your existing financial resources, such as bank and retirement accounts, as well as to obtain significant additional credit and loans in your name.

In a paper-based world, criminals needed access to physical documents containing your identifying information in order to impersonate you. But, the prevalence of digital communications and media has provided new opportunities for identity theft and fraud.

Identity theft and its associated fraud are a worldwide enterprise. Today’s identity thieves can gain digital entry to all of the places you store financial assets, such as bank and investment accounts, as well as your intangible financial assets, such as your credit rating, just by going through your computer.

Once they have your information, an identity thief can:

• access your computer, email accounts and bank accounts
• open new bank accounts, transfer funds from existing accounts and make purchases in your name
• apply for loans—including mortgage loans—and credit cards in your name
• open and drain your investment and retirement accounts
• gain access to your government benefits or acquire a passport in your name.

Victims of identity theft or fraud can experience both direct financial losses and difficulty restoring their credit. That is, losses can include money stolen from your bank account, as well as money spent to correct your financial records and restore your “good name.”

How Can You Prevent Identity Theft?

Although you probably can’t eliminate the risk of identity theft and fraud entirely, you can help to minimize it. By managing your personal information carefully, you can help to protect yourself against identity theft and fraud. Some of the best steps to take to safeguard your identity include:

• Being mindful of the information you give out. Be cautious about providing information in response to unsolicited phone calls, emails or postal mail.
• Lightening your wallet. Remove any identity documents that you don’t need day-to-day and store them in a safe place.
• Checking your account statements and credit status. Be aware of the billing cycles for your bank and credit cards, and check your account statements every month.
• Protecting your PINs. Shield your personal information number when entering it on an ATM—and don’t write your PIN on your card or store it in your purse or wallet.
• Swiping your cards yourself. Handle your credit or debit cards directly for all transactions, and don’t let your cards out of sight.
• Monitoring your credit report. Check your credit report regularly for any unusual activity.
• Destroying your documents. Don’t discard personal or financial documents without carefully shredding them first, so that the information cannot be extracted from the trash.
• Investigating suspicious activity. If you receive calls from creditors about unfamiliar accounts, or if you apply for credit but are unexpectedly turned down, investigate this further.

What Can You Do If Your Identity Is Stolen?

Most victims of identity theft say they discovered the crime when a financial institution contacted them about suspicious activity on their account, or when they noticed fraudulent charges on an account. The majority of identity theft victims knew how the offender obtained their information, but did not know anything about the offender.

If you learn that your identity has been compromised despite the precautions you’ve taken to protect yourself, there are still many actions you can take to minimize the damage and restore your online identity. The Department of Justice maintains a comprehensive checklist of actions you can take if you learn that your identity has been stolen. These include:

• contacting the relevant federal government agencies, depending on the type of identity theft you are experiencing
• reporting the fraud to credit bureaus
• informing all of your creditors, financial institutions and the major check verification companies of the suspected or confirmed identity theft and any attempted identity fraud

In the unfortunate event of confirmed identity theft, you also should be aware that some homeowners’ insurance policies provide coverage for this type of loss. Identity Fraud Expense Coverage can reimburse you for out-of-pocket expenses to help you recover after fraud or identity theft. This type of coverage can even help cover lost income and legal fees—so it’s important to review your homeowner’s policy as part of your “digital housekeeping” practices.