Once a thief has your confidential data, they can use it to wreak havoc on your financial life. These tips will help you prevent, detect, and fight against identity theft.
You probably know that identity theft occurs when a criminal takes personal information—like your name, Social Security number, birth date, or mother’s maiden name—and uses it to commit fraud. According to a Javelin report, 14.4 million consumers were identity theft victims in 2018.
Fortunately, the number of ID theft cases is trending down due to technology, such as embedded chips in credit cards. However, the out-of-pocket costs of being a fraud victim more than doubled between 2016 and 2018 to $1.7 billion.
The out-of-pocket costs of being a fraud victim more than doubled between 2016 and 2018 to $1.7 billion.
Once a thief has your confidential data, they can use it in surprising ways—filing false tax returns, submitting bogus health insurance claims, getting fake driver’s licenses. But it’s more common for a thief to empty your bank accounts, make charges on your credit cards, or open new credit accounts and then never pay. That could leave you with a massive financial loss and seriously botched credit reports.
10 best identity theft protection tips
Let's take a look at the best ways to avoid becoming an identity theft victim.
1. Understand how criminals get your data
The best way to limit your chances of becoming an ID theft victim is to understand how criminals get your personal information in the first place.
Stealing: A thief can take your wallet, purse, credit card, or personal documents the old-fashioned way, by snatching them when you’re not looking.
Dumpster diving: This dirty pastime involves rummaging through trash bins looking for bills, statements, or other documents with confidential information.
Skimming: A skimmer is an electronic storage device that can be used (or installed on a card payment slot) to steal your debit or credit card number.
Database access: Corrupt employees can steal personal information from a company database or sell it to other thieves.
Phishing: This is an email scam where a crook pretends to be a financial institution, government agency, or a well-known company and tries to dupe you into giving up your personal information.
Changing your address: A thief can divert your mail, so it goes to another location where they gain access to your confidential information.
2. Carry less personal information
If you don't carry personal data, it's less likely to be lost or stolen from you. So, only carry the bare essentials in your wallet or purse.
For instance, you should never carry your Social Security card, or a copy, because it’s the gateway to your identity. Besides, you only need the card in limited situations, such as completing paperwork for a new job.
Instead, memorize your Social Security number and keep the card in a locked, fireproof filing cabinet or bank safe deposit box so it can’t fall into the wrong hands.
Another item to purge from your wallet is paper checks. They reveal your bank account number and are very easy to counterfeit. Even one stolen paper check could be copied many times and used to deplete your account quickly. Consider using a debit or credit card instead.
Even one stolen paper check could be copied many times and used to deplete your account quickly. Consider using a debit or credit card instead.
If you carry a debit card, never write your personal identification number (PIN) on the card or carry it with the card. If a thief gets the card and the access code, they could drain your bank account in seconds. Your debit PIN is another number that you just need to memorize to stay safe.
Being smart about what’s in your wallet will go a long way toward making you less likely to become a victim of identity theft. The bottom line is that you should only carry what you really need and leave everything else in a safe place.
3. Limit your debit card use
As I mentioned, using a debit card is safer than paper checks when it comes to protecting yourself from identity theft. However, debit cards are not as secure as credit cards.
With a debit card, your liability depends on when you report a lost or stolen card. If you notify your bank before fraud occurs, you have zero financial responsibility. However, if you don’t catch debit card fraud early, you could be on the hook for these amounts:
- Notifying your bank within two business days gives you a $50 maximum liability.
- Notifying your bank within 60 days after receiving an account statement gives you a $500 maximum liability.
- Notifying your bank more than 60 days after receiving your statement gives you unlimited liability.
In other words, if it takes you more than two months to notice unauthorized debit card charges, you could lose every penny in your bank account linked to the card—plus, have to pay overdraft fees.
Using a debit card is riskier than a credit card when it comes to your financial responsibility for fraud.
With a credit card, if you report it lost or stolen before any fraud occurs, your liability is zero. And if you report it after a thief makes charges, your maximum liability is just $50.
So, remember that using a debit card is riskier than a credit card when it comes to your financial responsibility for fraud.
4. Destroy documents with personal data
You’ve probably heard that you should shred every piece of paper that contains personal information before throwing it away, especially pre-approved credit card offers. Documents with your name, address, Social Security number, or financial account numbers give criminals bits of information that can be used against you.
Use a cross-cut shredder that makes confetti out of your documents to make sure a dumpster diver could never figure out your confidential data.
5. Make your finances paperless
And speaking of paper, it’s much safer to go paperless and keep as much of your mail and financial activity online. While that may seem counterintuitive when it comes to preventing identity theft, snail mail is a common way that thieves can get your sensitive data.
Even if you have a mailbox that locks, an identity thief can forward your mail to their address without you knowing it. Receiving financial documents and paying bills online is much safer if you log on to your financial accounts from a secure Internet connection. Never pull up anything personal on a public computer or Internet connection.
Snail mail is a common way that thieves can get your sensitive data.
Financial documents that you receive in a digital format are always in your control. You can save them to your computer, an external hard drive, a remote storage service, or print them out, if necessary. Online banking also allows you to see your transactions as often as you like and to set up account alerts. That way, you’d know right away if someone tries to steal from you.
6. Protect your devices
Just like with your physical wallet, eliminate as much private data from your computer and mobile devices that you don’t truly need. And be sure to password-protect your devices so a thief couldn’t get your information. Always use strong passwords that have more than eight characters and use a combination of numbers, letters, and symbols.
Download security software for your computer and set it to update automatically. Also, update your operating systems and apps, which may include security improvements.
7. Notice the warning signs of identity theft
It’s impossible to prevent identity theft completely; however, if you catch warning signs early enough, you can minimize the damage. Watch out for the following red flags that someone is fraudulently using your personal information.
- Credit card charges that you didn’t make
- Charges or withdrawals from a financial account that you didn’t make
- Calls from collectors about debt that isn’t yours
- Bills or financial statements that are missing from snail mail
- A tax refund that never arrives
8. Keep an eye on your credit reports
Regularly reviewing your credit reports is one of the best ways to nip fraud in the bud. But it isn’t foolproof, because there are types of identity theft that don’t involve your credit, such as tax fraud.
The official free website where you can review reports from each of the nationwide credit bureaus (Equifax, Experian, and TransUnion) every 12 months is annualcreditreport.com. If you see incorrect information on your credit—such as the wrong address, accounts you didn’t open, inquiries from companies you don’t recognize, or inaccurate account balances—it may indicate that you’ve become the victim of identity theft.
Dispute any errors with each credit bureau and report fraud to the Federal Trade Commission (FTC). Also, contact the creditors that reported incorrect information about you and dispute it right away.
9. Freeze your credit
A credit freeze is a feature that you can request from the credit bureaus that prevents anyone from opening a new account in your name. As of 2018, a new federal law requires all three credit bureaus to offer free credit freezes.
A credit freeze doesn’t protect you against fraudulent use of an existing account, such as a credit card you already have. But it’s a proactive measure that gives you control over who can access your credit file.
10. Remember that kids can be identity victims
Did you know that children are over 50 times more likely to become victims of identity theft than adults? Unfortunately, it can be easy for a dishonest family member or friend with access to their personal records to steal their information.
Most parents are clueless that their child is a victim until they try to get a driver’s license or get turned down for a student loan or job. By then, it can be challenging to clear up problems, such as a botched credit report or even a criminal record that’s existed for many years in your child’s name.
Children are over 50 times more likely to become victims of identity theft than adults.
So, it’s a good idea to get in the habit of checking your kids’ credit files when you check your own. The credit bureaus require you to verify that you’re a child’s parent or legal guardian by providing proof of your address and copies of your identification, your child’s birth certificate, and your child’s Social Security card.
If you have an older child, who’s been set up as an authorized user on a credit card or has their own car or student loan, they would have a credit file. But if your young child has a credit report, he or she has likely become an identity theft victim. Having a credit file means someone used their information to open one or more credit accounts.
If your child is an identity theft victim, place a fraud alert or a security freeze on his or her file. Then notify the police and file a report with the FTC.
Just like you can't protect yourself from every type of potential identity theft, you can't completely protect your kids, either. The best ways to keep yourself and your family safe are to guard your privacy and stay vigilant for warning signs that you've been victimized.