One of the most dishearting aspects of living in the digital age is the rapid rise of identity theft. This happens when someone illegally obtains information about someone and wrecks havoc on the person's credit, employment, retirement benefits, and more by stealing money or property. Typically, identity theft involves taking sensitive information such as names, birthdays, Social Security numbers, addresses, bank accounts, credit card numbers, driver's license details, and more.
There are various types of identity theft, and although some are more publicized than others, none are good to whoever has been affected.
Identity theft is a growing problem. The U.S. Federal Trade Commission, which tracks consumer fraud and identity theft through the Consumer Sentinel Network (opens in new tab), received 5.7 million complaints in 2021. Of these, 25% were specific to identity theft, which saw a 113% increase year-over-year. As a result, total fraud losses in the U.S. in 2021 totaled $5.8 billion.
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What can be done?
There's no magic mechanism that will protect someone from identity theft. And yet, one can be proactive and consider signing up for an identity theft protection program. Individuals should also watch their credit reports and make sure everything is correct. The careful screening of banking accounts, credit cards, and other documents is also important. Finally, one should report Issues immediately to the necessary stakeholders for resolution.
The many types of identity theft
There are different types of identity theft. The majority of these fall under three broad categories: credit card fraud, government documents or benefits fraud, and loan or lease fraud. In addition, phone or utility fraud, banking, employment or tax-related fraud, medical fraud, and child identity fraud are also performed by criminals. You'll learn about them all below.
Government documents or benefits fraud
Citizens, permanent residents, and temporary working residents are all assigned a Social Security number in the United States. This nine-digit number is primarily used for federal retirement and tax purposes. For the former, criminals collect benefits intended for someone else.
Most fraud cases in this category revolve around criminals obtaining someone's name, Social Security number, and other identifying information and applying for government benefits. The forging of driver's licenses, passports, and other government documents also occurs.
Tax fraud is a similar type of identity theft, highlighted below.
Credit card fraud
The FTC says credit card fraud is consistently the most reported type of identity theft going back to 2017. Perhaps the main reason isn't that surprising; most of us have at least one credit card.
Thieves operating in credit card fraud do so by physically stealing cards or tricking account holders into providing credit card numbers online or on the phone. Many criminals have also turned to the dark web to gain information about consumers grabbed in data breaches. Then, they use this information to open new credit card accounts in the victims' names.
Credit card fraud leads to higher interest rates for law-abiding cardholders and negatively affects their credit rating. It can also lead to higher prices of consumer goods.
Interestingly, credit card fraud has grown significantly during the pandemic as more people have relied on the internet to make purchases of everyday goods such as groceries and clothing.
Loan or lease fraud
Loans can take many forms, and each is a target of criminals. In 2021, most involved applying for personal loans using identifying information such as name, address, and Social Security number. Other fraudsters open illegal real estate and auto loans using this same information. Improper apartment, house, and car leases also fall under this identity theft category.
Phone or utility fraud
Spam calls are an ongoing problem that doesn't seem to go away no matter what governments do. Many telephone scammers hope to steal money and personal information by pretending to be someone they are not and gaining personal information. Telephone scammers can be real people or involve robocalls and text messages.
Some spam-related scams might lead to utility fraud. This type of fraud involves using someone else's name or identity to order home services like internet, water, or gas. There's also cable and satellite fraud.
With banking fraud, individuals use complex schemes to defraud and obtain money or property illegally. It can involve forgery, stolen checks, fraudulent loans, and internet fraud.
Regarding identity theft, most banking fraud cases involve opening illegal accounts for financial gain. However, some involve stealing existing accounts. For example, obtaining someone's debit card illegally and using it to purchase items is banking fraud.
Employment or tax-related fraud
Employment theft isn't the same as employee theft, which is when someone steals from their company. Rather, employment theft often has to do with unemployment insurance. In this case, someone's identity is stolen, and the thief applies for unemployment benefits using that information.
By contrast, tax fraud involves using someone else's identity to collect refunds and other monies that are supposed to benefit the real person. Typically, this type of fraud surfaces during tax filing season. In this case, a taxpayer can't file taxes or receive their refund because someone beat them to it using the victim's Social Security number.
The Internal Revenue Service (IRS) website has a page dedicated to employment-related identity theft (opens in new tab). The page offers ways to determine whether your identity has been stolen (opens in new tab) and what you can do when it occurs.
Medical identity theft
Often affecting the elderly, medical identity theft is when someone steals personal information and submits fraudulent claims to Medicare and other health insurers. This hurts the government and its taxpayers, but it can cause problems for the person whose information was illegally taken, as it can disrupt medical care.
To avoid medical identity theft, individuals should keep their Explanation of Benefits statements and contact their health insurance company if something doesn't look right.
Child identity fraud
Finally, there's child identity theft. Like other forms, this type of fraud involves stealing identifying information for financial gain from minors. Children are susceptible to identity theft because they have no credit history associated with their Social Security number. Thieves can use this information to sign up for government benefits, apply for a loan, and much more.
For added peace of mind, look at the many ways to protect your Social Security numbers from hackers.