What is identity theft and how to prevent it

Identity theft has the ability to impact your life and your finances in many negative ways. The following guide will help you learn how to protect yourself from identity theft and show you how to report and recover from identity theft if you’re already a victim. 

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Price

$9 per month billed annually or $12 per month billed monthly

ID Theft Insurance

$1 million¹

Credit bureau monitoring

Equifax, TransUnion, Experian

Disclosure

^{¹$1,000,000 Identity Theft Insurance for Eligible Losses: Identity Theft Insurance underwritten by insurance company subsidiaries or affiliates of American International Group‚ Inc.. The description herein is a summary and intended for informational purposes only and does not include all terms, conditions and exclusions of the policies described. Please refer to the actual policies for terms, conditions, and exclusions of coverage. Coverage may not be available in all jurisdictions.}

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What is identity theft?

Identity theft is a crime that takes place when a criminal steals your sensitive personal or financial data and uses it without your permission. In many cases, an identity thief will use your personal information to impersonate you for their own financial gain or to fraudulently obtain some other type of benefit.  

How to check if your identity was stolen

It’s not always evident when an identity thief steals your personal information. So, it’s wise to stay alert for potential red flags that could indicate your sensitive data has been compromised. 

One of the best ways to check for identity theft is to monitor your credit reports from Equifax, TransUnion, and Experian. You can keep an eye on your credit information by signing up for a fee-based credit monitoring service or by claiming free copies of your credit reports on a periodic basis. 

Note: You’re entitled to a free credit report from each credit bureau once every 12 months courtesy of the Fair Credit Reporting Act or FCRA. These reports can be obtained from AnnualCreditReport.com. In spite of the website’s name, the three credit bureaus announced in Sept. 2023 that anyone can check their reports for free weekly.

As you read your credit report, here are some possible signs that you could be a victim of fraud:

• Items that you don’t recognize (e.g., current accounts or collections).
• Unauthorized credit inquiries.
• Inaccurate personal identifying information (e.g., name, address, Social Security Number, or date of birth).

Consequences of identity theft

Identity theft can have serious repercussions on the lives of its victims. If a criminal uses your personal data to commit fraud, you could experience the loss of money and property, credit damage, and much more. There are even cases where identity theft victims are arrested for crimes they didn’t commit. 

Identity thieves often use stolen information to commit fraud. One type of identity theft, known as true name fraud, occurs when a criminal takes your personal information and applies for fraudulent credit accounts in your name. 

True name fraud has the potential to damage your credit score and could make it difficult for you to qualify for legitimate loans and credit cards in the future. As a result, it’s important to take action to protect your credit if you suspect someone may have gained access to your personal information without your permission. 

How to report identity theft and who should you report it to?

Here are three ways to report identity theft if you know (or suspect) you’re a victim:

• File an identity theft report: You can visit IdentityTheft.gov to file an official identity theft report with the Federal Trade Commission. The website also provides tools to help you recover from identity theft, including sample dispute letters you can fill out and send to the credit reporting agencies. You can send a dispute letter along with a copy of your identity theft report to any credit bureau and ask it to block fraudulent accounts from your credit report thanks to your rights under the FCRA. 
• File a police report: You can file a report with your local police station if you’re a victim of identity theft. And just like the identity theft reports you file with the Federal Trade Commission, you can also send a copy of your police report to the credit bureaus (along with a credit dispute letter identifying any fraudulent accounts) and ask those bureaus to block any fraudulent accounts that appear on your credit reports. 
• Fraud alerts: You can place a fraud alert on all three of your credit reports by contacting any one of the three credit reporting agencies and disclosing that you suspect you’re a victim of identity theft. Fraud alerts make it harder for identity thieves to open accounts using your personal information because creditors must verify your identity before issuing new credit in your name in the future. 

What happens after you report identity theft?

After you request a fraud alert

If you place an initial fraud alert on your credit reports, the alert will remain in place for 12 months. However, if you confirm that your identity has been stolen by filing an official identity theft report with the Federal Trade Commission (IdentityTheft.gov) or a police report, you can extend your fraud alert for a seven-year period. 

After you dispute fraudulent credit items

As mentioned, you can also send a copy of your identity theft report or police report to each credit bureau. Along with your report, you should also include a dispute letter that identifies any fraudulent items on your credit report. Once a credit bureau receives this information, it has four business days to block any items you identify that are appearing on your credit report as a result of identity theft. 

Do police investigate identity theft?

Law enforcement agencies receive millions of reports of identity theft and fraud each year. Local police departments and federal investigative agencies like the Federal Bureau of Investigation (FBI), the United States Secret Service, and even the U.S. Postal Inspection Service all work to investigate identity theft. Federal and state law enforcement agencies also cooperate with prosecutors in an effort to bring many of the criminals who commit these crimes to justice. 

Of course, it goes without saying that many local police departments and federal law enforcement agencies are overwhelmed by the sheer volume of identity theft and fraud-related crimes that happen on an annual basis. So, it’s important to take actions yourself to prevent identity theft when possible, monitor your personal information, and restore your identity if you become a victim of this type of crime. 

How to prevent becoming an identity theft victim

There’s no way to completely safeguard your personal information from people with bad intentions. Nonetheless, if you’re looking for ways you can avoid having your identity stolen, the following actions might help:

• Freeze your credit reports with Equifax, TransUnion, and Experian. 
• Avoid sharing sensitive personal information (e.g., Social Security Number, date of birth, bank account numbers, credit card numbers, etc.). 
• Use different passwords and change them often (a password manager may help).
• Don’t answer emails, phone calls, or text messages from strangers. 
• Be alert for phishing schemes, credit card skimmers, and other types of scams identity thieves design to steal your personal information. 
• Review your credit reports, credit card statements, and bank statements on a regular basis for signs of fraud or identity theft. 
• Limit the number of credit cards you carry in your wallet (although there’s nothing wrong with having multiple credit cards if you manage them in a responsible manner). 

Is identity theft protection worth it?

It’s possible to monitor for identity theft by checking your credit reports often and learning to spot identity theft on your own. Yet if you suspect you’re already a victim of identity theft or you’re worried about becoming one, the extra services and conveniences included in a fee-based identity theft protection plan might be worth the additional cost. 

Identity theft protection services can provide you with benefits such as: 

• Identity theft insurance.
• Stolen fund reimbursement.
• Password management.
• Alerts if your personal data appears on the dark web, social media, arrest records, etc.
• Credit report and credit score access.
• Credit monitoring and alerts.

Prices for identity theft protection plans can vary. Plans often range between $15 to $30 per month for an individual depending on the level of service you choose. 

Of course, you should make sure that the cost of any recurring bill fits into your budget and won’t derail your savings or debt reduction plans before signing up for a new service. If you decide that identity theft protection services are right for you, it makes sense to shop around and compare different programs to find the best fit for your needs. 

Important statistics

• Consumers reported nearly $8.8 billion in identity theft and fraud-related losses to the Federal Trade Commission (FTC) in 2022 (30% more than the previous year). 
• The FTC’s Consumer Sentinel Network received over 3.5 million reports of fraud and identity theft from U.S. consumers in 2022 alone. 
• There were over 1,800 data breaches in 2022 according to the Identity Theft Research Center (ITRC). 
• At least 422 million individuals had their information exposed in data breaches in 2022. 
• The FBI received 800,944 complaints of cyber-crime in 2022, resulting in total losses of more than $10 billion. 

Frequently asked questions (FAQs)