What is identity theft? An explanation with examples

What is identity theft? 

Identity theft is the act of stealing someone’s personal information and illegally assuming their identity. A criminal can do a lot with stolen personal information, from making unauthorized purchases to taking over financial accounts. For instance, if someone steals your Social Security number and personal details, they might take out a loan in your name, leaving you responsible for the debt.

Sometimes, it can take months or even years to realize someone’s used your identity in this way, which is why protecting yourself is so important. 

What information are the criminals after? They would gladly find out these details about you:

• Home address, phone number, and email
• Full name and date of birth
• Personal ID number
• Social Security number
• Bank account details
• Driver’s license number
• Passport information
• Medical insurance information

Your login credentials for various accounts are also valuable data that scammers would happily exploit. But to protect your personal information from identity thieves, you must know how they get it.  

How does identity theft work? 

Criminals only need access to your personal information for identity theft to work. They can, of course, get hold of it in old-school ways — stealing mail or dumpster diving in search of discarded documents, such as bank statements or bills. However, with so much of our personal and financial information stored and shared online, fraudsters are now using computer technology for data theft through:

• Phishing. Cybercriminals send fake emails, texts or fake job offers or set up malicious websites that look reliable and trick you into submitting personal information like passwords or credit card details.
• Data breaches. Scammers exploit security vulnerabilities in organizations to steal large amounts of user data from their databases.
• Hacking. Hackers may break into computers, smartphones, or online accounts to access personal information you store digitally.
• Malware. Cybercriminals may use malicious software, such as viruses, trojans, or spyware, to infiltrate your devices and steal personal or financial information.
• Public Wi-Fi. Fraudsters might intercept unencrypted information you transmit over public Wi-Fi networks to seize your passwords, account details, and other personal data.
• Skimming. Sometimes criminals place specific devices on ATMs, gas pumps, or payment terminals to capture credit or debit card information when you use your card.

Once the criminals collect your information, they may take steps to avoid detection. For example, thieves may change your contact information, such as mailing address or phone number, so you don't receive notifications about the fraudulent activities, making them hard to identify.

Anyone can fall victim to this type of crime, so let’s look at some common types of identity theft. 

What are the most common types of identity theft?

With identity theft looming over everyone who uses online banking, shopping, and payment services, it’s good to know the specific risks you’re dealing with. Here are the seven types of identity theft to keep in mind:

Financial identity theft

Financial identity theft occurs when a thief uses your personal information, such as your Social Security number or credit card details, to open new accounts, apply for loans, or make unauthorized purchases. You might end up out of pocket and with a damaged credit score.

Medical identity theft

Medical identity theft happens when someone uses your personal information to obtain medical services, prescriptions, or insurance benefits in your name. This type of theft results in incorrect medical records, denied insurance claims, and unexpected bills for services you never received.

Child identity theft

Child identity theft involves using a minor’s Social Security number to open credit accounts, apply for government benefits, or secure loans. It often goes unnoticed for years until the child becomes old enough to apply for credit, only to find their credit history ruined.

Criminal identity theft

Criminal identity theft occurs when someone provides your personal information instead of their own to law enforcement during an arrest or investigation, leading to legal records, warrants, or fines issued under your name.

Identity cloning

Identity cloning is when a thief steals and uses a significant amount of your personal information to impersonate you for various purposes, such as accessing your financial accounts, receiving government benefits, or even committing crimes. To effectively clone your identity, the criminal must accumulate the entirety of your personal information.

Synthetic identity theft

Synthetic identity theft involves creating a new, fake identity by combining real (stolen) and fabricated information, such as using an actual Social Security number with a false name and address. Scammers typically use this type of fraud to apply for credit. Tracing synthetic identity theft is difficult because it blends real and fictional details.

Tax identity theft

Tax identity theft occurs when someone uses your Social Security number to file a fraudulent tax return and claim a refund in your name. You might discover this type of theft when you attempt to file your taxes and find that someone has already submitted a return.

Examples of identity theft

It’s easier to become a victim of identity theft than you think. Cybercriminals have clever ways of targeting you online while you’re carrying on with your everyday business, such as shopping or job hunting.

Scam websites

Anyone can become a target for identity theft when shopping online. Imagine a website offering precisely what you need at an unbeatable price. The site looks professional, and the checkout process is smooth. You enter your credit card details, address, and other personal information to make the purchase.

However, after a few days, you notice unexpected charges on your credit card statements, and the product you ordered never arrives. Unfortunately, the website was a cleverly disguised scam that someone set up to steal your personal and financial information. They now have your credit card details and use them to make purchases or sell them on the dark web.

Fake job offers

Fake job offers are another common way for cybercriminals to get your information. Picture yourself job hunting and receiving an exciting email about a fantastic job opportunity. The email looks legitimate, with a company logo and a professional tone. The “employer” asks you to fill out an application form, which includes your Social Security number, address, and bank account number for setting up a “direct deposit” for your paycheck.

Excited about the job, you quickly fill it out and send it back. A few weeks later, you start noticing unusual charges on your bank account, and your credit score takes a hit. You’ve unknowingly handed over your personal information to a scammer, who now uses it to open credit cards and make purchases in your name.

However, unusual activity on your bank account is not the only sign of identity theft.

How to know if you’ve become a victim of identity theft

It isn't easy to know that someone stole your identity unless you keep a close eye on your accounts and credit activity all the time. But if someone did sneak into your private data, you will typically notice strange activity related to your accounts or have services denied to you. Here are telltale signs of identity theft:

• Unrecognized charges on your credit card or withdrawals from your bank account.
• Bills for items or services you did not buy.
• Statements or bills for accounts you did not open.
• Calls or letters from collection agencies about a debt that isn’t yours.
• Unfamiliar accounts on your credit report.
• Denials of loan applications that you expected to be approved.
• Credit inquiries on your report when you haven’t recently applied for credit.
• A sudden, unexplained drop in your credit score.
• Unfamiliar medical bills or explanation of benefits letters for treatments you never received.
• Expected mail, such as bills or bank statements, stops arriving or goes missing.
• A duplicate return alert when you attempt to file your tax return.

What happens if someone steals your identity

Identity theft can ruin your credit score and drain your bank accounts, let alone cause frustration as you spend months trying to close the fake accounts under your name. Here’s a breakdown of thieves’ actions and how they would affect you:

What identity thieves do ➡ how it affects you:

• Access your bank account ➡ Your money is withdrawn or transferred to the criminal’s account.
• Open credit accounts or take out credit cards in your name ➡ Your credit score drops, and you are burdened with debts you didn’t owe.
• File fake health insurance claims ➡ You receive medical bills for treatments or services you never received.
• File a fraudulent tax return in your name ➡ Your legitimate tax refund is delayed or stolen, and you may face complications with the IRS.
• Steal your child’s identity ➡ Your child’s credit is damaged before they even reach adulthood.

What to do if your identity is stolen

Time is of the essence when it comes to identity theft — the faster you respond, the better your chances of minimizing the damage. Here’s what you need to do to recover from identity theft:

• Lock your accounts. Contact your bank or credit card issuer immediately and lock your accounts to prevent further access. Also, report any unauthorized purchases and inquire if the bank will issue a refund for the fraudulent charges.
• Dispute fraudulent accounts. Review your credit card statement from your bank and the credit report from your credit bureau for any unusual activity and dispute fraudulent charges or accounts directly with them.
• Inform debt collectors. If debt collectors contact you, let them know about the identity theft and your actions, such as filing a police report and disputing fraudulent accounts, so they don’t chase you for debts that aren’t yours.
• File a report with local law enforcement. Report the theft to the fraud department at your local police to document the crime and alert them to suspicious activity.
• Freeze your credit or set up fraud alerts to prevent scammers from opening new credit accounts in your name, and inform lenders to take extra precautions.
• Protect your child’s identity. Check if your child has a credit report and consider placing fraud alerts or security freeze to safeguard their information.

How to report identity theft

Reporting identity theft is the next step in the recovery process. Here’s how to report identity theft in the US:

• Report to the Federal Trade Commission (FTC). Visit the FTC’s website at IdentityTheft.gov, where you’ll create an identity theft report and receive a recovery plan tailored to your situation.
• Contact the credit bureaus. Place a fraud alert or credit freeze on your credit report by contacting one of the major credit bureaus — Experian, TransUnion, or Equifax. They are required to inform the other two bureaus. You also have the right to dispute fraudulent accounts directly with the credit bureaus.
• Notify your bank and credit card issuers. Immediately report the fraud to your bank and credit card companies. As mentioned above, you should close affected accounts and dispute unauthorized transactions.
• File a police report. Contact your local police department to file a report, which can help in disputing fraudulent charges and clearing your name in severe cases.
• Contact your insurance provider. If you have identity theft recovery or any insurance related to identity theft, you should contact that provider and ask for help with the next steps.

How to avoid becoming a victim of identity theft

There is no foolproof method for avoiding identity theft, but you can take proactive steps to improve your data security by a mile:

• Secure your devices. Use strong, unique passwords and enable biometric features like fingerprint or facial recognition. Don’t forget to keep your software up to date to stay protected.
• Use a password manager. A password manager can create and store strong, unique passwords for each of your accounts, so you don’t have to remember them all. One master password is all you need to memorize.
• Be cautious of phishing scams. If you get a suspicious email or text asking for personal information, verify the sender before clicking links or providing details.
• Avoid sharing information over the phone. Never share your personal or financial information over the phone, even if the caller says they represent a government agency or a bank. Call that entity yourself to verify if they really need you to provide some information.
• Monitor your credit reports. Regularly check your credit reports for any unfamiliar activity.
• Stay safe online. Use a VPN on public Wi-Fi and always check that the websites you visit are secure (look for HTTPS in the URL).
• Use identity theft protection tools. For extra peace of mind, use a reliable identity theft protection service. If you go with NordProtect, it will monitor the dark web 24/7 for your leaked email addresses, phone number, and Social Security number. If it finds them out there on the dark web, NordProtect will notify you right away. You’ll also get timely security alerts about changes in your credit activity, such as new credit inquiries or unauthorized accounts being opened under your name. If someone still manages to steal your identity, you’ll be able to apply for recovery for the costs you’ve incurred while restoring it, such as legal fees.Protect personal documents. Check your mail daily, and shred documents with personal info before discarding them. To make your life easier — go paperless whenever you can.