Identity theft is a growing problem that can have serious financial and legal consequences. According to the Federal Trade Commission, there were over 1.4 million reports of identity theft in 2021 alone.
Identity thieves use stolen personal information to open fraudulent credit cards, steal money from bank accounts, file fake tax returns, and commit other crimes under your name. This can ruin your credit, drain your bank accounts, and take months or even years to fully resolve.
That‘s why having identity theft protection and credit monitoring in place is so important. This comprehensive guide will explain everything you need to know, including:
- The different types of identity theft
- Common ways your identity can be stolen
- Costs and potential impact of identity theft
- Tips to prevent identity theft
- Identity theft protection services
- Credit monitoring and how it works
- Choosing the best identity theft protection service
Contents
What is Identity Theft?
Identity theft occurs when someone steals your personal or financial information to commit fraud or other crimes. Some common forms of identity theft include:
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Credit card fraud: Opening new credit cards in your name or making unauthorized charges on your existing cards. This can quickly rack up debt and seriously damage your credit.
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Loan or lease fraud: Taking out loans or leasing cars, equipment, or property in your name. You are then held responsible for the payments.
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Bank fraud: Accessing your bank accounts to steal money, write fraudulent checks, or make wire transfers from your accounts.
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Government document fraud: Using your personal information to get government IDs, passports, Social Security cards, or other documents. These can be used to open accounts or commit other types of fraud.
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Utility fraud: Opening new utility accounts in your name or getting services connected at a different address. This leaves you stuck with the bills.
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Tax fraud: Filing fake tax returns with your personal information to collect fraudulent refunds.
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Medical identity theft: Using your insurance to obtain medical services, prescription drugs, or medical equipment. This can impact your health insurance rates and medical records.
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Criminal identity theft: Someone who is arrested using your name and personal information. This creates a criminal record under your identity.
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Child identity theft: Stealing a child‘s Social Security number to open accounts. This often goes undetected for years and can severely impact the child‘s ability to build credit later on.
How Does Identity Theft Happen?
Identity thieves are opportunistic and use a variety of methods to get your personal information. Here are some of the most common ways identities are stolen:
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Data breaches: Your information may be compromised in data breaches that affect retailers, banks, hospitals, government agencies and other businesses. Major breaches often leak millions of consumer records containing sensitive data.
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Phishing scams: Deceptive emails, texts, calls or websites trick you into sharing account numbers, passwords, Social Security numbers and other personal details that thieves use to access accounts.
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Skimming devices: Thieves install skimming devices on ATMs, gas pumps and other card readers that steal card numbers and PINs. Devices can also be attached on top of card slots.
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Dumpster diving: Thieves rummage through trash looking for documents with personal information, unshredded credit card offers and bank statements.
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Mail theft: Your mail can be stolen right out of your mailbox. Thieves look for bank and credit card statements, pre-approved credit offers, tax data and other valuable documents.
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Hacking: Identity thieves hack into your email, social media accounts or other online accounts to obtain personal information.
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Fake websites: Scam websites pretend to be legitimate sites to trick you into entering your login, credit card or other sensitive details which are stolen.
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Public Wi-Fi snooping: Information you send over unsecured public Wi-Fi can be intercepted by thieves nearby. This exposes usernames, passwords, emails and messages.
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Theft of wallets, purses and documents: Losing wallets and identification documents makes it easy for thieves to steal your identity.
Costs and Impact of Identity Theft
Identity theft can have severe financial costs and other impacts:
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Financial losses: The 2022 Identity Fraud Study by Javelin Strategy found that identity theft caused $52 billion in losses to consumers in 2021. The average stolen was $8,841 per victim.
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Higher interest rates: Identity theft often tanks your credit scores. Lower credit scores mean higher interest rates on credit cards, loans, mortgages and other financing.
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Legal issues: If an identity thief commits crimes, fills prescriptions or has medical procedures in your name, you may face legal troubles, civil lawsuits or criminal investigation.
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Lost time: Victims spend an average of 200 hours disputing fraudulent accounts and restoring financial accounts. Missed work, lost wages and high stress levels also take a toll.
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Medical identity theft: Inaccurate medical records caused by identity theft can impact your medical treatment. This also leads to inaccurate medical bills and insurance claims.
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Child identity theft: Children‘s credit can be permanently damaged. They may be turned down for student loans, housing, jobs, utilities and have trouble getting approved for credit cards with good terms.
The time, stress and damage caused by ID theft can be overwhelming. That‘s why taking steps to prevent identity theft is critical.
9 Tips to Prevent Identity Theft
While you can never completely prevent identity theft, there are actions you can take to minimize your risk:
1. Check your credit reports annually – Review credit reports from Equifax, Experian and TransUnion once per year to catch any suspicious activity early. You can get free reports at www.annualcreditreport.com.
2. Freeze your credit – Stop thieves from opening new credit in your name by freezing your credit reports. This blocks access to your reports unless you temporarily lift the freeze when applying for credit. Freezing is free and easy to do online.
3. Strengthen passwords – Use strong, unique passwords for all accounts. Stolen passwords put your information at risk. Consider using a password manager app to boost security.
4. Beware of phishing scams – Don‘t click email links or attachments from unknown sources which can contain malware. Avoid sharing info via email, text or phone if you didn‘t initiate contact.
5. Shop on secure sites only – When shopping online, only enter payment details on sites that start with https in the URL and have a lock icon in the address bar. This indicates encryption is protecting your data.
6. Educate children – Teach kids to never share personal information online or give it out to strangers. Child identity theft is growing.
7. Ask about security – Ask how businesses, medical providers and other entities you interact with secure your private data. Only do business with those taking privacy seriously.
8. Review bills and statements – Watch for unauthorized charges or suspicious transactions that may indicate identity theft. Report problems immediately.
9. Shred sensitive documents – Use a cross-cut shredder to destroy any documents containing personal information before disposal to prevent dumpster divers from stealing data.
Identity Theft Protection Services
Identity theft protection providers use advanced technology to constantly monitor your accounts and critical information. They act as an extra set of eyes watching out for thieves misusing your identity.
You‘ll get alerts about suspicious activity indicating potential fraud. Depending on the provider, protection services watch for:
- New credit applications and loans
- Credit report inquiries
- Changes to your account information
- Suspicious transactions with banks, card issuers and other financial accounts
- Public records changes like new aliases or addresses tied to your identity
- Compromises of your information online, on the dark web or in data breaches
- Abuse of your medical insurance and prescriptions
Top identity protection services also provide extensive identity restoration services. If you do become an identity theft victim, these services assign a dedicated case manager to handle contacting banks, creditors, collection agencies, credit bureaus and other entities to fix the mess. They help with documentation, forms and paperwork to clear up fraudulent accounts and charges in your name.
Without identity theft protection, you must conduct this difficult process entirely on your own, which often takes many months to resolve.
Credit Monitoring and Credit Reports Explained
Credit monitoring is a key feature provided by most identity theft protection plans. It gives you insight into your credit reports and alerts you to important changes.
Your credit reports detail your payment history, loans, credit cards and other borrowing. Lenders use the information in your credit reports from Equifax, Experian and TransUnion to calculate your credit scores.
Here are key facts about credit reports and scores:
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Credit reports and monitoring: Tracking activities on your credit reports lets you see indicators of potential identity theft, like new credit inquiries or accounts you didn‘t open.
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Credit scores: Your FICO or VantageScore credit scores provide a quick snapshot of your creditworthiness. Scores range from 300-850. Higher scores qualify you for better loan terms.
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Score factors: Payment history, debt levels, credit history length, pursuits of new credit and credit mix determine scores. Identity theft can easily tank scores.
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Free weekly online reports: You can access your Experian credit report for free weekly by signing up at www.experian.com. Monitoring your own report helps detect identity theft.
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Free annual credit reports: Get your three annual credit reports from Equifax, Experian and TransUnion at www.annualcreditreport.com. Check reports from each bureau, since they may contain different activity.
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Disputing errors: If you spot fraudulent accounts or charges on your credit reports, immediately dispute them with each bureau to get the false information removed. This helps limit damage from the identity theft incident.
Make sure any identity theft protection service you choose provides notifications if changes occur to your credit reports. Alerts about suspicious activity let you take quick action to avoid having your credit ruined and financial accounts compromised.
5 Top Identity Theft Protection Services
There are numerous companies offering identity protection services. Comparison shopping helps identify the best value based on your budget and specific needs. Here are 5 top-rated identity theft protection providers to consider:
Norton 360 with LifeLock
- Rates start at $9.99 per month for one person
- Up to $1 million in stolen identity event insurance coverage
- Dark web monitoring alerts if your info is found for sale
- Monitors credit, bank and financial accounts
- Restoration by US-based agents
McAfee Identity Theft Protection
- Beginner plan starts at $7.99 per month
- Family plan covering 10 people starts at $13.99 per month
- Up to $1 million insurance policy
- Credit monitoring with all three bureaus
- Alerts for financial account openings
IdentityForce UltraSecure + Credit
- Rates start at $17.99 per month for individuals
- Up to $1 million in insurance for lost wages and expenses
- Monitors credit, financial, medical, criminal and public records
- Dark web surveillance for compromised info
- Restoration services by licensed private investigators
IDShield
- Individual plans start at $8.95 per month
- Family plans start at $15.95 per month
- $1 million protection policy
- Tri-bureau credit file monitoring
- Alerts for cash withdrawals, balance transfers and large purchases
ReliaShield
- Plans start at $9.95 per month
- Coverage benefits up to $2 million
- Full service restoration and lost wallet support
- Extensive credit report monitoring
- Medical identity monitoring
The best identity theft protection service for you depends on your budget and the specific features you want. Take advantage of free trials to test options out. Services with robust monitoring, high-limit insurance and U.S.-based restoration support provide the most complete protection.
The Bottom Line
Identity theft can strike anyone and leads to significant stress, expenses and credit damage. Stopping identity theft before it happens saves you from a nightmare.
While you can never completely prevent identity fraud, taking proactive precautions reduces your risk substantially. Keep personal and financial information secure, shred documents, watch for phishing scams and review your credit reports regularly.
A comprehensive identity theft protection service adds another strong layer of security. Alerts give you early warnings about potential misuse of your information. If the worst still happens, you get expert help fixing the problems created by identity thieves.
Don‘t wait until you become the next identity theft victim. With strong prevention measures in place, you can avoid the devastation from having your identity and finances compromised.
