Identity theft, or identity fraud, occurs when somebody obtains and uses your personal data without your knowledge, in order to commit a criminal act. Most often, your information will be used to commit financial fraud. An identity thief usually attempts to obtain goods or services in your name, and to ultimately leave you stuck with the bill.
Thieves who steal other people's identity may make purchases, apply for credit, open bank accounts, apply for loans, apply for government benefits, and obtain services in the victim's name, may forge checks or bank drafts, obtain wire transfers of money using the victim's accounts, or may engage in similar acts of fraud.
Identity theft may directly target your financial accounts and credit card numbers, it may be focused on gathering information that can be used to open charge accounts or to obtain loans using your credit, or it may be focused on obtaining information that will help an identity thief get past security questions in order to access your online accounts.
Who Gets Targeted for Identity Theft
Every person is vulnerable to identity theft. Identity thieves do not only target those will well-established credit histories. They also target those who may not have much credit, such as college students, in order to set up fake credit accounts in their names.
Students are relatively easy targets as their personal information is often easier to obtain. Many young adults don't always adequately safeguard that information, many don't closely monitor their financial accounts, and most regularly receive credit card applications in the mail.
Corporate Identity Theft
Businesses may also be the targets of identity theft. Upon applying for credit, a business may discover that it has a history of nonpayment of bills – and upon investigation find that the bills were run up by an identity thief. A small business that 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. Even when a fingerprint check is seemingly involved, as may occur with a smart phone, that check may be bypassed by somebody who has learned or successfully hacked a password.
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.
Victims of identity theft often have a great deal of difficulty clearing their credit records, during which time 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 the victim – obtaining identification cards, bank accounts, loans, and jobs using the victim's name. The victim may not find out about the problem until contacted by bill collectors or contacted by the government about unpaid taxes.
Beyond problems getting loans or mortgages, a damaged credit history can cause the victim to experience difficulty obtaining new jobs or renting an apartment, as employers and landlords often review credit records for new applicants. The longer or more involved the identity theft, the more difficult it can be to repair the damage.
A number of companies are offering identity theft insurance. Some 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 that result from the fraudulent activity.
There is some debate over whether the cost of insurance is excessive in comparison to the average person's need, or the benefit the insurance company will actually provide. But some people would rather pay a modest amount of money for the additional peace of mind that comes from being insured. If you are worried about identity theft and find insurance coverage that you believe to be reasonably priced, and which provides coverage that you believe will be adequate, you may benefit from the peace of mind that the coverage will provide.
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 the misuse of your credit or debit card account, except for the narrow exceptions defined by law (e.g., the first $50 improperly charged to a credit card).