What Is Identity Theft? Types and Examples

What Is Identity Theft?

Identity theft is the crime of using the personal or financial information of another person to commit fraud, such as making unauthorized transactions or purchases.

Identity theft is committed in many different ways and its victims are typically left with damage to their credit, finances, and reputation.

Understanding Identity Theft

Identity theft occurs when someone steals your personal information—such as your Social Security number, bank account number, and credit card information.

How Thieves Get Your Data

Thieves can attempt to obtain your personal information in various ways. For instance, some sift through trash bins looking for bank account and credit card statements.

Identity thieves increasingly use computer technology to obtain other people's personal information for identity fraud.

To find such information, they may search the hard drives of stolen or discarded computers; hack into computers or computer networks of organizations and corporations; access computer-based public records; use information-gathering malware to infect computers; browse social networking sites; or use deceptive emails or text messages.

Once identity thieves have the information they are looking for, they can ruin a person's credit rating and the standing of other personal information.

Types of Identity Theft

There are several types of identity theft, including:

Financial Identity Theft

Financial identity theft occurs when someone uses another person's identity or information to obtain credit, goods, services, or benefits. This is the most common form of identity theft.

Social Security Identity Theft

If identity thieves obtain your Social Security number, they can use it to apply for credit cards and loans and then not pay outstanding balances. Fraudsters can also use your number to receive medical, disability, and other benefits.

Medical Identity Theft

In medical identity theft, someone poses as another person to obtain free medical care. 

Synthetic Identity Theft

Synthetic identity theft is a type of fraud in which a criminal combines real (usually stolen) and fake information to create a new identity. This new identity is used to open fraudulent accounts and make fraudulent purchases. Synthetic identity theft allows the criminal to steal money from credit card companies and lenders who extend them credit based on the fake identity.

Child Identity Theft

Child identity theft involves using a child's identity for various forms of personal gain. This is common, as children typically do not have the capability to take steps to create obstacles for the perpetrator.

The fraudster may use the child's name and Social Security number to obtain a residence, find employment, obtain loans, or avoid arrest on outstanding warrants. Often, the victim is a family member, the child of a friend, or someone else close to the perpetrator. Some people even steal the personal information of deceased loved ones.

Tax Identity Theft

Tax identity theft occurs when someone uses your personal information, including your Social Security number, to file a bogus state or federal tax return in your name and collect a refund.

Criminal Identity Theft

In criminal identity theft, a criminal poses as another person during an arrest to try to avoid a summons, prevent the discovery of a warrant issued in their real name, or avoid an arrest or conviction record.

Examples of Identity Theft

It can be difficult to know if you've been a victim of identity theft, especially if you don't check your financial statements regularly. Some clear indicators of identity theft include:

• Bills for items that you didn't buy that you discover on your credit card statement, online account, or via invoices by email or U.S. mail
• Calls from debt collectors regarding accounts that you didn't open
• Loan applications that are denied even though you believe your credit is in good standing
• Bounced checks
• A warrant for your arrest
• Unfounded medical bills and explanations of benefits (EOBs) from an insurance company
• Utilities being shut off
• The inability to sign into accounts
• Inexplicable hard inquiries into your credit report
• New credit cards in your name that you didn't apply for

Potential Victims of Identity Theft

Anyone can be a victim of identity theft. However, children and aging adults are particularly vulnerable. They may not understand specific situations or paperwork, such as bills. In addition, their care and finances often are handled by others who normally may not inform them of details or regularly check their accounts.

Children who are victims of identity theft may not become aware of it until they are adults. Adults who need medical care often have to provide a lot of personal information repeatedly to hospitals, clinics, caregiving agencies, and doctor's officers. As a result, this information can be sought and obtained nefariously from a variety of locations.

Identity Theft Protection

Many types of identity theft can be prevented or limited. One way to protect yourself is to continually check the accuracy of personal documents and promptly deal with any discrepancies.

Services Available to Help

There are several identity theft protection services that help people avoid or mitigate the effects of identity theft. Typically, such services help:

• Safeguard personal information
• Monitor public and private records, such as credit reports, and send alerts to clients about suspicious transactions and status changes
• Resolve problems associated with identity theft

In addition, some government agencies and nonprofit organizations provide similar assistance, typically through websites that offer information and tools to help people avoid, remedy, and report incidents of identity theft.

Many of the best credit monitoring services also provide identity protection tools and services.

Recovering From Identity Theft

Managing identity theft can be a long, painstaking process. After you have filed, and retained a copy of, your report with the FTC, there are other steps that you need to take:

1. Start by placing fraud alerts on all of your credit reports. Fraud alerts are an added layer of protection in that lenders must confirm your identity before opening an account, usually via phone.
2. Freeze your credit reports. Freezing your reports prevents access to any credit information. Your credit report is removed from circulation so that a lender will not have access to it. If access is denied, no account in your name can be opened.
3. Contact all of the companies involved in the identity theft. Demonstrate to them that you are a victim of such theft, that you did not open any accounts, and that no purchases of goods or services are legitimate.
4. If necessary, file complaints with companies, dispute questionable charges, and share any other reports you have filed, such as police reports or reports with the FTC. The Fair Credit Billing Act and the Electronic Funds Transfer Act works in your favor.
5. Contact all credit reporting agencies to dispute any incorrect charges and information on your credit reports.
6. Contact your bank(s) and credit card companies and request that they close your current credit and debit cards and issue you new ones.
7. Change all of your login and password information.
8. From there, continue monitoring your credit reports to ensure that your personal and financial information remains secure and unavailable to thieves.
   

The Bottom Line

Identity theft is a traumatic and difficult experience and can severely damage your creditworthiness. It can leave you with bills that you did not incur and cannot pay.

It's important to monitor your bank and credit card statements regularly. Review your credit report periodically for any signs of fraud.

If you suspect that you are a victim of fraud, there are ways to dispute the charges, fix the theft, and stop your private information from being made available to thieves. In addition, the government provides various resources to help you repair your credit standing.