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The thought of someone breaking into our house and stealing our prized possessions is a real fear that many people deal with. But most people don’t worry about their personal information getting stolen and having their credit ruined. The reality is, identity theft is growing and it needs to be taken seriously.
As more and more people turn to the internet to do their banking, investing and shopping, and as more and more companies turn to electronic means to transfer and store customer data, you will continue to hear more and more news stories about identity theft.
For example, in 2016, over $16 billion was stolen from US consumers. In total, 15.4 million American citizens had their identities stolen. In 2015 there were 13 million victims of identity theft.
And I am sure you have heard the news of the security breach at Equifax.
Despite your carefulness in using and sharing your personal information, identity thieves continue to gain access to confidential data and commit crimes under your name or spend your money without your knowledge.
Understanding the ways identity thieves pull off these crimes may prevent you from becoming another statistic. In this post I am going to walk you through various ways thieves go about stealing your identity, tips for you to use to help prevent it from happening and what to do in the event you do become a victim.
Table of Contents
How Do Thieves Steal Your Identity?
So how exactly does one get their identity stolen? Unfortunately there is not one way or method. Criminals are using various techniques and it seems with new technology, new ways to steal identities are popping up every day. Below I list many, but not all, of the ways your identity could get stolen. Included are a few of the biggest scams out right now.
- Dumpster Diving: This involves a thief rooting through your trash looking for credit card or bank statements, utility bills, insurance records, etc. Any of this information will help a thief steal your identity.
- Mail Theft: When a thief commits mail theft, they steal your mail in an attempt to get access to your bank or credit card statements or utility bills.
- Skimmers: Skimming is when a thief attaches a device to a credit card reader and skims the information from a swiped card. From there, a copy is made and the thief goes on a spending spree.
- Phishing Emails: This form of identity theft occurs when a thief tricks you into giving out your personal information through an email, phone call, etc.
- Smishing: This is a new form of identity theft. Its done by sending text messages. The scammer pretends to be your bank and say there is an issue with your account and offers a link. Or they will say you won the drawing you entered and to click a link. Once you click the link, you’ll be asked to provide personal information. And don’t reply STOP either because you are just letting the scammer know you are a real number and to keep trying. Instead, forward the text to 7726, which forwards it to your cell phone carrier to be blocked.
- Malware Emails: This happens when a thief sends you an email with a link that you click on. The link installs a virus or trojan on your computer and then tracks and records when you enter your credit card number. In some cases, it will just track the sites you visit and the thief will then send a phishing email that looks like it came from a company you deal with.
- Untrustworthy People: When you give your credit card to your server at the restaurant or your social security number to the receptionist at the doctor’s office, they turn around and use that information against you, if they are untrustworthy.
- Data Breaches: This happens when a company you have transacted business with is hacked into and the data they store is stolen.
- Fake Apps: Scammers create a fake app that looks like a bank or credit unions app. You download it and try to log on but can’t. The scammer though has your username and password and logs into your account and steals your money. The solution is to be very careful when downloading financial institutions apps.
- Netflix Scam: With so many people members of Netflix, this one isn’t a surprise. Scam artists send out fake emails that look like they are from Netflix. The email says that your payment was denied and offers a link to go to in order to enter new payment information. But the link takes you to a spoof site where the scammer records your credit card or bank info and then steals your money.
- AirBnB: Some users of AirBnb looking to get a great deal on a rental have been getting scammed by fake listings. The scammer takes your money and runs and you don’t find out until you arrive at the location you thought you were renting.
I encourage you to watch this great video on skimming devices. It will open your eyes as to how easy it is for crooks to steal your identity without you ever knowing it.
As I noted above, these are not all of the ways thieves steal your identity. You can check out this great resource for some other ways thieves steal your identity.
12 Critical Tips To Help Prevent Identity Theft
So now that you know various ways thieves go about stealing your identity, what do you do? You might think of only using cash for purchases and limiting who you give your personal information to. These are a good start but there are other options you can use as well which I highlight below.
#1. Protect Your Personal Information
Since identify theft involves the fraudulent use of your personal information, such as your credit card number and social security number, never give this information to anyone you do not know or cannot trust.
When you must give the information, such as when making an online purchase, make sure that the person or website handling it can be trusted and that the information will be used only for the purpose that has been stated.
For example, whenever buying something online, make sure the URL is secure. To do this, look at the URL of the site. If the site is secure, it should read “https”. The “s” at the end ensures extra protection is present.
In addition to this, you will see a locked padlock as well. Below is what this looks like on various browsers. The image is courtesy of the University of Wisconsin at Madison.
#2. Use Credit Cards Instead of Debit Cards
Whether or not you are a fan of credit cards, they have safety measures to protect against fraud. Of course, so do debit cards. But the main difference is with credit cards, you will never pay the money that was charged unless it is found to not be fraud. With a debit card, the money is out of your bank account until the investigation is over and then the money is refunded back to you.
When my identity was stolen, I saw a few unauthorized debit card transactions in my bank account that totaled $300. I reported the issue to my bank. Since a debit card was used, I was out that $300 until the bank finished its investigation.
Once it determined that it was fraud, they refunded me the $300. But this was 2 months later. At the time, I was living on a tight budget and it was harder to get by with that money missing from my account.
On the other hand, when I found a few suspicious charges on my credit card, the credit card company flagged the transactions and I didn’t have to pay for them while they investigated. During this time, interest did not accrue either.
If you fear going into debt with credit cards, you can try out a service called Debitize. By using them, you shop with your credit card and Debitize will transfer money from your checking account for each purchase you make with your credit card and put the money into a separate account. When it comes time to pay your credit card bill, you are guaranteed to have the money to pay the bill in full.
#3. Be Smart With Your Passwords And PINs
We use passwords and PINs to access our emails, bank accounts, ATMs and social media sites. One of the easiest ways criminals can steal your identity is by getting access to your passwords and PINs.
Do not write them down or save them in your smart phone. Memorize them. Change your passwords frequently. When creating a new password, use a combination of letters and numbers. Avoid using words and numbers that can be easily guessed, such as your mother’s name or your phone number.
The best trick is to use a sentence you remember. Take “a penny saved, is a penny earned” for example. Your password could take the first letter of each word, making it: “ApSi1pe”.
An even safer option is using two-factor identification. This means that in addition to entering a password, you also have to enter a random 8 digit verification code. For this to work, the site you are logging into has to support it.
Here is how it works. You log in as usual and then the website asks if it should send the verification code to the email or phone on record. Many times you can even just receive a text message.
When you get the message, enter the code and access your information online. The verification codes are only good for a few hours and by getting an alert, you will know immediately if someone is trying to gain access to your online account.
#4. Keep Your Online Shopping Activities Strictly At Home
Online stores are there so that you can shop from home. So keep your online shopping activity strictly at home if you want to be safe. In public places such as restaurants or parks, there is always the possibility that someone might be reading your fingers. The use of public computers (in a library, cybercafe or other places) or free public wifi should be strictly avoided as there may always be someone reading your digital footprints.
In fact, there is a rise of thieves setting up fake free wifi hot spots in hopes of getting their hands on your personal information.
At the end of the day, if you are doing anything online where you have to enter a password or are checking on personal information, wait to do so until you are at home or on a wifi network you know you can trust.
#5. Install A Full-Featured Anti-Malware
Many online fraudsters use malware to steal sensitive information, including a credit card number and banking password from your computer. Malware is a malicious software program, such as a virus or trojan horse.
The only way to protect your computer and yourself is to install a full-featured anti-malware package, like Norton Antivirus, which constantly guards against and eliminates malware.
Of course, just having a solid anti-virus program may not be enough. You still need to make sure it is always up to date too. Luckily you can set it to automatically update so you will always be protected.
#6. Use A Third Party Payment Service
Although credit cards are pretty safe if you use them on secure sites only, they are like sitting ducks on non-secure sites. If you have to make an online payment through a non-secure site, then you should use a third party service like PayPal instead.
Since PayPal doesn’t have any of your money, the thieves would have to transfer money from bank accounts or credit cards. As long as you are monitoring your accounts on a regular basis, you should be tipped off to an attack early on.
#7. Watch Your Snail Mail
Banks, credit card companies and utility companies still send a lot of documents by mail. These may include bank statements, insurance forms, credit charge receipts, expired charge cards and pre-approved credit offers.
Collect your mail as soon as it arrives in your mailbox. Do not leave the documents lying around anywhere in your home. Securely and permanently destroy all the documents that you do not need using a shredder. If you are going away on vacation, call the postal service to request a mail hold.
When getting rid of old bank and credit card statements and any other financial documents, be sure to shred them before throwing them away. Also be sure you know what financial documents you should keep and what to shred and throw away.
A better option than receiving these forms in the mail is to sign up for electronic delivery. This way, your documents will either be sent to you through email or you will get an alert as to when you should log into your account and download the forms.
#8. Review Your Credit Reports
Reviewing your credit report is a good way to get a clue into your identity being stolen early on. By checking your credit report, you can spot new accounts that are opened in your name or any unusual inquiries into your credit.
This is key because many times thieves will use your information but change your address so you never get the bill in the mail. You can check your credit report for free each year at AnnualCreditReport.com. Additionally, you can this trick I use to get my credit report free three times a year.
And while you are checking your credit report, it would be a smart thing to check your credit score as well. You do have to pay for this if you choose to get it from any of the major credit reporting bureaus.
Alternatively, you can get your credit score for free from CreditWise.
#9. Don’t Forget About The Kids
Children are the ideal victims for identity theft given their perfectly clean credit backgrounds. According to statistics in the field, 10% of children under the age of 19 have their identity stolen.
That figure may be an underestimation as many parents don’t think of monitoring the status of their child’s identity, which leads to many kids’ identity theft cases remaining unreported.
Using the social security number of a child fraudulently puts children at risk and has a negative impact on their future ability to secure a student loan or get a decent job. College-aged children are also a target for identity thieves.
Make sure you review your child’s credit report and consider putting a freeze on their credit as well.
#10. Be Smart About Social Media
With the escalating popularity of social media, people have started to exhibit increasingly intimate social media behaviors, which includes sharing birthdays, cell numbers, pet’s name, children’s names, when and what school they’ve attended and other details that people usually use to create passwords.
Sharing apparently harmless information can lead to your identity being stolen by clever and skillful individuals. For many people, even if this information isn’t used to create a password, they are the answers to questions when resetting a password.
With this information, a thief can easily click on a “forgot password” link, answer the security question and have access to your account in a short amount of time.
#11. Carefully Watch Your Medical Records
Medical identity theft is one of the most serious forms of identity theft that gained more popularity over recent years. This type of fraud not only leads to incurring charges for medical care that you did not receive, but also puts you at risk of higher premiums or even losing your coverage entirely. Your medical records will no longer be your own and will lose their accuracy as they will include medication and treatment of another person.
Statistics show that medical identity theft is usually committed by health care professionals, who can easily access personal information of various people, especially seniors who keep their Medicare card or social security card with them in their wallets.
#12. Question, Question, Question
At the end of the day, you are the last line of defense when it comes to protecting your identity. So before you click on that link in the email telling you that you won $10 million dollars, question it. Could it really be true? Not likely. So don’t click on the link.
The same can be said for suspicious emails from friends. Sure you trust them, but if the email doesn’t sound like them, if there is no text and only a link, or if the email was sent to a large list of people, then don’t click on the link or believe what it says.
If you are really torn over it, call or text them instead. Don’t reply to the email as most likely the scammer will reply since they have access to the email account.
The bottom line is to just be smart and think things through. If things feel off or odd or something is just too good to be true, then something is going on and you are better off just ignoring it and moving on.
Bonus Tip – #13. Freeze Your Credit
With the seemingly endless news stories of credit breaches, I’ve decided to freeze my credit with all 3 agencies. It was simple to do and I can rest assured that no new credit lines will be opened in my name. The downside to doing this? If I apply for new credit, I need to have the freeze lifted.
Seeing as though I don’t regularly open new credit accounts, this isn’t much of a hassle.
However there are a few other things to note:
- Depending on your state, you might have to pay to freeze your credit. If you are a victim of identity theft, the fee is waived. Also, in many states that do require a payment, senior citizens can freeze their credit for free.
- Depending on your state, your credit freeze might not be forever. Some states limit the time your credit can be frozen. For me living in Pennsylvania, I can only freeze my credit for 7 years. I’ll have to make a note to freeze my credit again once the current freeze is lifted.
Here is a complete list by state of the costs to freeze and unfreeze your credit and how long the freeze if good for.
Tips For Victims of Identity Theft
If you are one of the many victims of identity theft, what are your options for clearing things up? The first thing you have to remember to do is to remain calm. I know this is easier said than done. But I was a victim of identity theft a few years ago.
I remember logging onto my bank account and seeing my balance was negative by a few hundred dollars. My immediate reaction was confusion, wondering how and where I spent my money. That emotion then turned into fear as I realized what had happened.
I went over to my bank to tell them the issue. They had me hand over my debit card and canceled it. Then they issued me a new one. They then took a statement from me about what happened and had me point out which transactions were fraudulent.
From there I waited for them to complete the investigation. After a couple of months, they determined that the charges were fraudulent and refunded the money back into my checking account. To this day, I have no idea how the thief got my information.
So I know how it can be an emotional time. But you will get through it and restore your good name. It will just take some patience on your end. Here are some more tips for you to get through this tough time.
- Run Virus and Malware Scans on Your Computers: Your first step should be to run virus and malware scans on your computer to make sure everything is clean.
- Change Your Passwords: Once you confirm your computer is clean, then start changing your passwords. Be sure to write them down and use the tip I mentioned above to make them more difficult to crack.
- Contact Your Credit Card Issuers: Reach out to all of your credit card issuers and let them know that your identity has been stolen. Ask for new cards with new account numbers.
- Freeze Your Credit Report: Call the three credit bureaus and have your credit frozen. This ensures no new accounts can be opened without your approval. Here are their contact numbers: TransUnion 1-800-680-7289; Equifax 1-800-525-6285; Experian 1-888-397-3742
- Report The Crime To The Police: This is critical as they will write up an official report of the crime. You want to get a copy of that report as most financial institutions will request it from you.
- Review Your Credit Report: This will help you assess the damage that was done to your credit and will let you know which companies to contact to let them know there are fraudulent charges. Be sure to do this again a few months after the fact to verify nothing new is going on.
- File A Complaint With The FTC: The FTC won’t open a criminal investigation, but they will provide more assistance on how to get through being a victim of identity theft with detailed information.
Depending on the severity of the situation, not all of these steps will be required. For me, I ran a virus can on my computer, changed my passwords and checked my credit report.
I then made sure to carefully review my bank and credit card transactions for the next few months to make sure nothing unusual appeared. When nothing did appear, I knew that only my debit card number was stolen and not my entire identity.
Identify theft is the fastest growing crime today. It can ruin your credit, wreck your finances, damage your reputation and in extreme cases, land you in jail. Since identity theft is such a lucrative enterprise, criminals are constantly on the prowl looking for easy targets.
Unfortunately, it is not possible to prevent it entirely and the only way to remain safe is to be on your guard at all times.
So take some smart steps to better guard your personal information. The smarter you are about this topic, the less likely you will find yourself a victim one day.
And in the event you do become a victim, keep a calm mind and follow the tips I outlined above.
I have over 15 years experience in the financial services industry and 20 years investing in the stock market. I have both my undergrad and graduate degrees in Finance, and am FINRA Series 65 licensed and have a Certificate in Financial Planning.
Visit my About Me page to learn more about me and why I am your trusted personal finance expert.
9 thoughts on “12 Critical Steps To Prevent Identity Theft (And How To Recover As A Victim)”
It’s really sad the kind of precautions that we need to take today, but it’s so important. Any more the smallest thing can lead to the wrong person attaining your information.
After this latest security breach, I decided to freeze my credit. I have the peace of mind knowing that no new credit can be extended in my name.
Identity theft with kids is a big deal. Often times when the parents have their identities stolen it’s a good ideas to check your childrens identity as well because more than likely they may have stolen theirs as well.
I never realized this until I had kids of my own. It is on my to-do list to freeze their credit too. I can see how they are a prime target for hackers.
That’s horrible that kids have to deal with identity theft. I’ve never had mine stolen, though my best friend’s wife did several years ago and it was an absolute pain in the neck to take care of.
I’ve heard of horror stories too. When I had the fraudulent charges in my bank account it was scary. I can’t imagine the feeling if they did more damage.
It’s a real balancing act with social media. On one hand it’s a great tool for communication and connecting. On the other, divulging too much information can be dangerous as you mentioned. I’m still trying to figure out where the happy medium is. I am extra cautious in what I reveal about my kids.
Yeah, there definitely is a medium, we all just have to find it. For us, we rarely post anything about our kids on social media. It boggles my mind when I see parents posts pics of their kids first day of school with the sign telling name, age, school, etc. That is a huge red flag.
Great tips Jon, the best tip we could add is to track your finances carefully. We had unauthorized transactions once and that red flag was the first sign of possible identity theft.
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