Identity Theft: What It Is, How to Prevent It, Warning Signs and Tips

ID theft is when someone illegally poses as you, usually to get money. Know these warning signs and prevention tips.
Bev O'SheaAug 4, 2021
How to prevent identity theft

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

Identity theft is when someone uses your personal data — your  name, Social Security number, birthdate, etc. — to impersonate you, typically using that information to steal from you.

It's a growing problem in the U.S., and pandemic relief made it worse as identity thieves targeted relief checks and unemployment benefits. Theft of benefits in 2020 was up a whopping 2,920% over 2019. Overall, the Federal Trade Commission received 1.4 million complaints of identity theft from consumers in 2020, up 113% from the year before.

Here’s what you need to know to reduce chances you’ll be a target, spot warning signs and take quick action to minimize damage.

Identity theft happens when someone uses your sensitive data to pose as you or steal from you. Identity thieves may drain your bank and investment accounts, open new credit lines, get utility service, steal your tax refund, use your insurance information to get medical treatments, or give police your name and address when they are arrested.

Frequent data breaches mean your information may already be exposed. In this new reality, it’s smart to take steps to prevent malicious actors from using your personal information and ruining your financial life.

Once a criminal has your info, here are common ways it may be exploited:

Credit identity theft happens when a criminal uses your personal information, such as birthdate and Social Security number, to apply for a new credit line.

Warning signs: You might see an unexpected change in your credit scores or an account you don’t recognize on your credit reports. You may get debt collection notices or a court judgment against you. The best way to prevent it is to freeze your credit.

Criminals steal a child’s identity and apply for credit in that child’s name. Often it is not discovered until the victim applies for college loans or other credit.

Warning signs: If your child is getting offers of credit cards or phone calls about late payments or debt collections, investigate. You can to prevent it.

is when criminals use a patchwork of identity details to construct a fictitious consumer, using a Social Security number — often one of a minor child or one that is simply made up — that is not yet in the credit bureaus’ database and combining it with a name and address. They then apply for loans and credit cards, often making payments for years as the credit limits grow. Then comes a "bust out," when cards are maxed out and the criminals disappear.

Warning signs: If you try to freeze your child’s credit and discover their Social Security number is already in use. Often it is not discovered until the child is applying for student loans. It is not always preventable, because sometimes criminals make up and use a Social Security number even before it's assigned.

Sometimes fraudsters use a Social Security number to file a tax return and steal your tax refund or tax credit.

Warning signs: You may be unable to e-file because someone else has already filed under that Social Security number, you get an IRS notice or letter referencing some activity you knew nothing about or IRS records suggest you worked for an employer that you did not.  can help you beat criminals to filing in your name, and some states offer six-digit identity protection PINs (after a rigorous verification) with additional security.

Using someone else’s identity to get health care services is medical identity theft. It’s particularly dangerous because it can result in medical histories being mixed, giving doctors and hospitals wrong information as they are making health care decisions.

Warning signs: Claims or payments on your insurance explanation of benefits that you do not recognize can suggest that someone is using your health care benefits. If you’ve fallen victim, you’ll need to both report it to your insurance company and inform your health care team to be sure information in your health care records is actually yours.

Criminals use personal data to access your financial accounts, then change passwords or addresses so that you no longer have access.

Warning signs: An email, letter or text from your financial institution that refers to an action (like a password or email change) or transaction you don't recognize.

Criminal identity theft occurs when someone gives law authorities someone else’s name and address during an arrest or investigation. This is often done with false identification, such as a fake driver’s license.

Warning signs: You may be detained by a police officer for reasons that are unclear to you, or be denied employment or a promotion because of something found in a background check.

You’re unlikely to find a fail-safe way to prevent identity theft, and monitoring services only let you know after something has gone wrong. But there are 11 things you can do to make it much harder for identity thieves.

 with all three major credit bureaus — Equifax, Experian and TransUnion — restricts access to your records so new credit files cannot be opened. It’s free to freeze your credit and unfreeze when you want to open an account, and it provides the best protection against an identity thief using your data to open a new account.

Your Social Security number is the master key to your personal data. Guard it as best you can. When you are asked for your number, ask why it is needed and how it will be protected. Don’t carry your card with you. Securely store or shred paperwork containing your Social Security number.

Scammers can make phone calls appear to come from government entities or businesses, and emails that appear to be legitimate may be attempts to steal your information. Initiate a callback or return email yourself, working from a known entity such as the official website, rather than responding to a call or email. And be wary of attachments — many contain malware.

Use a password manager to create and store complex, unique passwords for your accounts. Don’t reuse passwords. Adding an authenticator app can reduce your risk. Don’t rely on security questions to keep your accounts safe; your mother’s maiden name and your pet’s name aren’t hard to find. Think carefully about what you post on  so you don't give away key data or clues about how you answer security questions.

Many financial institutions will text or email when transactions are made on your accounts. Sign up so that you know when and where your credit cards are used, when there are withdrawals or deposits to financial accounts and more.

Stolen mail is one of the easiest paths to a stolen identity. Have your mail held if you’re out of town. Consider a U.S. Postal Service-approved lockable mailbox. You can also sign up for  through the USPS, which gives you a preview of your mail so you can tell if anything is missing.

Any credit card, bank or investment statements that someone could fish out of your garbage shouldn’t be there in the first place. Shred junk mail, too, especially preapproved offers of credit.

If you’re paying online or in a store, use a digital wallet, an app containing secure, digital versions of credit and debit cards. You can use it to shop online or at a compatible checkout terminal. Transactions are tokenized and encrypted, which makes them safer. In addition, contactless transactions have fewer health risks.

. According to Javelin’s report, only 48% of us routinely lock our mobile devices. Use passwords on your electronic devices. Use a banking app rather than a mobile browser for banking.

The three major credit reporting bureaus are giving consumers access to a  weekly until April 20, 2022. Check to be sure that any accounts in forbearance or deferment are being reported properly, and to watch for signs of fraud. You can also sign up for a from NerdWallet to receive alerts when there are changes.

Read financial statements. Make sure you recognize every transaction. Know due dates and call to investigate if you do not receive an expected bill. Review “explanation of benefits” statements to make sure you recognize the services provided to guard against health care fraud.

Here are some of the ways your personal information can be compromised:

When your wallet is lost or stolen, someone else may gain access to all the information in it.

Someone simply takes your mail or forwards your mail to a different address, so that you suddenly stop getting most mail.

Hackers may be able to see what you are doing when you use free public Wi-Fi.

Hackers invade databases holding sensitive information, such as in the Equifax credit bureau hack of 2017. Almost everyone has been affected by a .

This is when someone . You may stop getting calls and texts, or you may get a notice that your phone has been activated.

Some fraudsters try to get you to disclose personal data, such as credit card numbers, Social Security numbers and banking information, by sending an official-looking email. Spoofing involves doing much the same thing with caller ID, so that the number appears to be that of a trusted company or government agency.

Skimming is getting credit card information, often from a small device, when a credit card is used at a brick-and-mortar location such as a gas pump or ATM.

You may be told you have won something or even that you are in danger of being arrested. The caller claims to need personal, banking or credit information to verify your identity or to know where to send you money.

Fraudsters can learn a password just by watching your fingers as you key it in. The information on your credit card can be photographed with a smartphone while you shop online in a public place. A business might leave sensitive information where people can see it.

Opening an email attachment or visiting an infected website can install malicious software on your computer, such as a keylogger. That does what it sounds like — logs every keystroke, giving criminals access to passwords, account numbers and more.

is a one-stop shop for information and reporting identity theft. Start with that site, which is run by the Federal Trade Commission, and follow its recommended steps to make a recovery plan. You may also need to contact your police department, the Postal Service and the credit bureaus. The IRS has a phone line for identity theft, at 800-908-4490, and a on its website.

You can also go directly to your credit card issuer if your credit card was lost, stolen or used without your knowledge. If it appears someone else used your health benefit, contact your health insurer and consider contacting any involved providers to make sure someone else’s health history is not mixed with yours.

Reporting identity theft starts an investigation and the process of restoring your good name. The exact steps will depend on the type of identity theft.

Credit card issuers generally replace the cards with new ones with a different number, and you are back in business. Taxpayer identity theft or theft of benefits typically are resolved more slowly.

No matter which type of identity theft you experience, keep extensive notes about phone conversations and retain related emails.

Identity theft protection services let you know that your identifying information has been used, or that it is at risk because it was exposed in a data breach. If you are a victim of identity theft, they may also guide you — and reimburse you for costs — through the process of cleaning up the mess and restoring your identity.

If you’re already doing all you can do to protect your identity or feel you don't have time to do it, you may want to consider an Protections vary, and most offer additional ways to protect your privacy and other services. The best choice among the paid services is one that fits your budget and offers you the coverage you care about.

Before you pay for one, though, check to be sure you don’t have you’re not using. For instance, if you were affected by the 2017 Equifax data breach, you are entitled to identity restoration services even if you did not file a claim.

On a similar note...
Dive even deeper in Personal Finance