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Identity Theft 101

Identity theft continues to be one of the fastest-growing crimes in the United States. Sadly, many victims are robbed of their identities without even realizing it, and by the time they find out, many of them will have had their credit ratings severely damaged — or worse.

Identity theft is…

So what is identity theft? Simply put, it's when a thief uses a victim's unique identifying information — Social Security Number, credit card accounts, even home address — to commit fraud or other crimes in the victim's name.

Identity theft generally takes two forms: “account takeover,” which occurs when the thief uses the victim's existing financial accounts to buy things; and “application fraud,” which is when the thief uses the victim's personal information to create new accounts — or even a whole new life — in the victim's name.

Identity theft will continue to grow

Identity theft is a costly crime — banks and other businesses have attributed annual losses of up to $48 billion to identity theft expenses, while consumers have lost up to $5 billion each year.

Experts predict that identity theft will continue to grow as electronic technology advances. Interestingly, however, recent data shows that 68.2% of identity theft crimes happen offline, while only 11.6% of instances occurred online (Privacy Rights Clearinghouse;

How identity theft happens

Check out the following scenarios for an idea of how identity theft can happen, as well as what can happen to your financial standing:

  • John Doe sets up a phony website that claims to offer “discounts on prescription drugs.” Jerry Smith responds to a phishing e-mail from the website, visits the site to place an order, and enters the requested information, including his credit card number. Mr. Doe collects the data from the website and goes on a shopping spree with Mr. Smith's credit card. The credit card issuer then attempts to collect payment from Mr. Smith for Mr. Doe's purchases.
  • Jane Doe steals her sister Mary's credit card number. Jane uses Mary's card number to buy a plane ticket across country, put a security deposit on a new apartment, and buy items for her new home. All of these purchases will appear as charges on Mary's credit card statement.
  • Jack Loe moves from one home to another but fails to notify the post office, his bank and others of his change of address. Tom Green moves into Jack's old home, then opens Mr. Loe's mailed bank statements and uses that information to transfer money in Mr. Loe's bank account to a new account in Mr. Loe's name that Mr. Green created.

These are just a few of the ways that identity theft can occur. Basically, any document you have, any unsecure website you visit, any conversation you have on a cordless or cell phone that contains personal, identifying information about you can be used by a thief to take possession of your identity.

Preventing identity theft

All is not lost, though: You can still uncover identity theft if you're willing to monitor your financial records regularly. Your credit reports can show unauthorized activity made in your name; so can your bank and credit card statements, depending on how the identity thief targets you. There are also programs available that can alert you to changes in your credit report, and some credit card issuers make an attempt to contact their customers if they detect unusual buying patterns or other signs of abnormal card usage.

Your first and best defense against identity theft, however, is personal vigilance — safeguarding your credit and debit cards, installing firewalls on your computer, protecting or shredding documents that contain your personal information, monitoring your credit report and other financial records, and turning down telephone or Internet offers that promise you the world in exchange for “just a little information about you.”

Bottom line, you do not need to store your money in a mattress or commit your personal information to memory and destroy a seemingly vulnerable paper trail. Protecting yourself from the threat of identity theft generally involves some minor adjustments to your habits. With common sense and the proper protective steps, you can significantly reduce your personal risk of identity theft.

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