Identity theft, also known as identity fraud, involves somebody obtaining and using your personal data without your knowledge to commit a criminal act. Data that may be used for purposes of identity theft includes your name, address, telephone number, phone card or credit card number, mother's maiden name, and Social Security number.
Most often, your information is used to commit some form of financial fraud or deception - whether buying something on your credit, obtaining money from your bank account, or obtaining new credit in your name. The identity thief usually intends to obtain goods or services in your name, and to ultimately leave you with the bill.
Identity theft does not only target those will well-established credit histories. Identity thieves also target those who may not have much credit, such as college students, and set up fake credit accounts in their names.
Students make relatively easy targets for identity theft:
- Their personal information is often easier to obtain, and students don't always adequately safeguard their personal information,
- Many students don't closely monitor their financial accounts,
- Most students regularly receive credit card applications in the mail.
Businesses can also be the targets of identity theft. Upon applying for credit, a business may discover that it has a history of nonpayment of bills - bills run up by an identity thief.
A small business who is in need of a loan may get the double surprise of being denied credit and learning that it probably will not be able to obtain credit until it clears up the significant financial obligations somebody else has accumulated in its name.
In modern society, many financial transactions occur without any face-to-face contact. These transactions occur based upon names, addresses, account numbers, and sometimes passwords, but rarely require anything that is actually unique to an individual, such as a fingerprint check.
Think about how easy it can be to use a credit card to place an order online, or (in many cases) to use your bank's website to pay your bills. Once a criminal has access to your accounts, it is not much more difficult for the criminal to commit a wide variety of financial crimes.
Thieves who steal other people's identity have been known to use a stolen identity to:
- Make purchases,
- Apply for credit,
- Open bank accounts,
- Apply for loans,
- Apply for government benefits,
- Obtain cable or utility services in the victim's name,
- Forge checks or bank drafts,
- Obtain wire transfers of money using the victim's accounts,
Identity thieves may also engage in other, similar acts of theft and fraud.
Victims of identity theft often have a great deal of difficulty clearing their credit records. During the time it takes to attempt to clear their credit records, their own credit rating and ability to obtain loans is often significantly impaired.
In the most extreme cases, an identity thief may actually pretend to be you - obtaining identification cards, bank accounts, loans, and jobs using your name - where you don't find out there is a problem until you get hounded by bill collectors, contacted by the government about unpaid taxes, or even find out that a bankruptcy has been filed in your name.
The longer or more involved the identity theft, the more difficult it can be to repair the damage. A damaged credit history can also cause you difficulty obtaining new jobs or renting an apartment, as employers and landlords often review credit records for new applicants.
A growing number of companies are offering "identity theft insurance". Many people will be eligible to obtain such insurance as an option through their homeowner's insurance policy.
If you have insurance for identity theft, depending upon the policy terms, you may be able to get assistance in detecting and reporting incidents of identity fraud, and may be eligible for reimbursement for any obligations which result from the fraudulent activity. However, even if you don't carry insurance, as long as you make a prompt report after detecting unauthorized activity you should not have to pay any account balances resulting from identity theft, except for the narrow exceptions defined by law (e.g., the first $50 improperly charged to a credit card).
There is some debate over whether the cost of insurance is excessive in comparison to the average person's need. But some people would rather pay the money for the additional peace of mind. If you are worried about identity theft and find insurance coverage which you believe to be reasonably priced, and which provides coverage you believe will be adequate, you may well benefit from the peace of mind that the coverage will provide.