Tally logo

Identity Theft 101: What It Is and How to Prevent It

Anyone can fall victim to identity theft. Here's 10 steps on how to reduce risk and protect your personal information.

May 12, 2021

There’s nothing more personal than your identity. It defines who you are and sets you apart from the crowd. It’s something no one else can share with you.

Unless, of course, they steal it.

As we become increasingly reliant on technology to shop, bank and store personal information, identity theft becomes increasingly prevalent. In fact, cases of identity theft in the U.S. have continued to rise since 2017, reaching a peak of 1.3 million in 2020.

Fortunately, by understanding what it is and how it occurs, you can learn how to prevent identity theft. After all, there’s only one you — let’s make sure it stays that way.

What Is Identity Theft?

man-in-office-at-a-loss-for-words-computer

Identity theft occurs when someone steals your personal information — your SSN, credit card number, driver’s license and so on — and uses it to commit fraud. This identity theft definition includes opening credit card accounts, taking out loans and even receiving medical treatment — all under your name.

How does identity theft occur?

The most common methods by which thieves can steal your identity are through:

  • Data breaches – When a thief hacks into an organization’s database, they can access invaluable client information, including names, credit card information and even Social Security numbers.
  • Unsecured browsing – Unsecure websites allow hackers access to any personal information you may input, such as when you’re online shopping.
  • Malware – Thieves can use malicious software to steal your data or monitor your computer activity without you even knowing it.
  • Dark web marketplaces – The dark web is a hidden online network that’s inaccessible to the average user. Through this unrestricted marketplace, identity thieves can easily sell your personal information to others.
  • Phishing – In a phishing attack, a hacker will send an email or text message that appears to be from a legitimate source. This communication often directs the recipient to a website where they may be asked to update their account or make a purchase, unknowingly providing the hacker their personal information.
  • Wi-Fi hacking – When you use a public Wi-Fi network, hackers can “eavesdrop” to intercept any personal information you input into a website.
  • Card skimming – Card skimming devices can be placed over the card readers of ATMs or fuel pumps to steal a customer’s credit card information.
  • Credit card theft – Your credit card information can also be stolen through data breaches, Wi-Fi eavesdropping and physical theft.
  • Mail theft – By intercepting sensitive mail, such as bank statements, utility bills and even credit card offers, an identity thief can obtain your personal information.
  • Mobile phone theft – From banking apps to emails and texts, our phones hold a world of sensitive information that can provide a thief with everything they need to steal your identity.

How a stolen identity can mean lost finances

Identity theft is not only an invasion of your privacy. With access to your personal information, identity thieves can also wreak havoc on your finances.

An identity thief may:

  • Open new credit card accounts.
  • Make purchases on your existing cards.
  • Take out personal or auto loans.
  • Receive medical treatment through your health insurance.
  • Access money in your bank account.
  • File taxes under your name to receive your refund.
  • Open new utility accounts.

On top of leaving you with a mountain of unpaid bills, these acts of identity fraud can also cause your credit score to plummet. And until you can prove someone stole your identity, you’ll likely be held liable for all of these charges.

Clues For Spotting Identity Theft

Thieves are sneaky by trade, but if you know how to check for identity theft, you can catch it almost as soon as it happens.

There’s a possibility you’ve been subjected to identity theft if:

  • You stop receiving important mail, including checks or bills.
  • You receive statements for credit cards you didn’t sign up for.
  • You receive bills for items or services you never purchased, including medical services.
  • You receive an alert that someone has logged into your account.
  • A company notifies you that your personal information may have been compromised in a data breach.
  • A debt collector calls you about debts that aren’t yours.
  • You have unauthorized withdrawals from your bank.

What should you do if you suspect identity theft?

If you notice any of the signs of identity theft, time is of the essence. To confirm whether your identity has been stolen, you can request a free copy of your credit bureau credit report from websites such as AnnualCreditReport.com, which will include any evidence of fraudulent charges, credit card applications or loans.

Following that, take immediate action to prevent further damage to your finances:

  • Contact one of the three national credit reporting agencies to place a fraud alert.
  • Submit an ID Theft Affidavit if you need the IRS to mark an account for questionable activity.
  • Check that you still have access to your important accounts.
  • Change your account passwords in case a thief knows them.
  • Run a virus scan on your computer or take it into a professional for this service.

10 Ways to Protect Yourself From Identity Theft

Although anyone can become an identity theft victim, utilizing identity theft prevention techniques can help you deter thieves and avoid this costly and frustrating experience.

Take a look below at the top 10 ways you can protect yourself from identity theft.

  1. Monitor your credit report – Free credit report websites give you detailed information regarding your finances and credit. If you check your credit report at least once a year, you can stay ahead of any suspicious or fraudulent activity.
  2. Review all credit and banking statements – By reviewing your credit card and banking statements once a month, you can confirm that no mysterious charges appear on your accounts.
  3. Set up a credit freeze or fraud alert on your accounts – With a credit freeze, creditors can’t access your credit report unless you lift the freeze. That means if an identity thief tries to open an account under your name, the creditor won’t be able to check your credit report, forcing them to deny the request. A fraud alert also makes it difficult to open a false account. It requires creditors to take additional steps to verify your identity before they can access your credit report.
  1. Regularly check your mailbox – Regularly collecting your mail limits the possibility that an identity thief can steal your important documents. If a trip out of town prevents you from checking your mail for several days, consider putting a hold on your mail at the post office until you return.
  2. Shred sensitive information – After you’ve reviewed your bank statements, bills and credit card offers, shred the documents before recycling them. This way, dumpster-diving identity thieves can’t access any of the sensitive information contained within these documents.
  3. Never give personal information over the phone – If you receive a call from the IRS, Social Security Administration, your bank or another financial institution, don’t provide them with any personal information. If you do get a call that could be real, hang up and call the publicly listed phone number for that entity.
  4. Don’t store your Social Security card in your wallet – It’s best to keep as little as possible in your wallet in case it’s stolen.
  5. Consider a virtual private network (VPN) – If you rely on public Wi-Fi to access the internet, consider surfing the web through a VPN. This tool encrypts your information to protect you from hacker eavesdropping. If you’re unable to use a VPN, avoid checking your bank account, paying bills or online shopping while using a public network.
  6. Install firewalls and virus-detection software – To further protect your computer and other devices from hackers, install firewalls and virus-detection software as an additional line of defense.
  7. Choose complex passwords – Using the same simple password for all of your accounts may make it easier for you to remember, but it also makes it easier for hackers to steal your private information. To help you keep track of different, complex passwords, try a password manager like 1Password or Bitwarden.

What to Do If You’re a Victim Of Identity Theft

business-woman-on-phone-manhattan

If you do fall victim to identity theft, don’t panic. There are steps you can take to reclaim your identity and mend any financial damage:

  • First, stop the thief in their tracks by cutting off access to your accounts. This means canceling any credit cards that may have been compromised and freezing your bank account. Change all of your passwords and PINs, even those you don’t think the thief has access to.
  • After you’ve reinforced your accounts, file a report with the Federal Trade Commission (FTC). This organization can create a recovery plan for you and even help guide you through the process.
  • Perform damage control with the help of the FTC and credit bureaus. With your FTC report, you can dispute fraudulent charges and close fraudulent accounts without being held liable for outstanding payments. The three national credit bureaus — TransUnion, Equifax and Experian — can remove all fraudulent information from your report.

Protect Your Finances to Build Your Credit With Tally

By taking preventative measures, you can better protect yourself (and your credit) from the damaging effects of identity theft. And while you’re mitigating the negative impact of credit card debt, consider using Tally to manage your debt.

With automatic payments and customized payoff plans, Tally can help you get out of credit card debt twice as fast. Plus, with their advanced data encryption technology, you can trust Tally to keep all your banking information safe.

Download the Tally app to take control of your finances.