Identity Theft Basics

We’ve all heard of identity theft, but what does this term really mean? Going far beyond credit card fraud, identity theft is a rapidly growing crime that most people will face at some point in their lives. Credit.com explains the different kinds of identity theft crimes common today and pinpoints new identity theft trends that are emerging.

What is identity theft? Identity theft is officially defined as the deliberate assumption of another person's identity. Thieves use Social Security numbers, driver’s licenses, passports, account information, and other personal details in order to impersonate their victims. With this data, identity thieves apply for mortgages, buy cars, open new accounts, apply for jobs, join the military, commit crimes, access savings, and enter the United States illegally, all using someone else’s name.

How is identity theft different from financial fraud? The term "financial fraud" covers common credit card, check, and debit card fraud. When a criminal uses your credit cards or debit cards to make a purchase, he or she usually hasn´t assumed your identity. Recovering from financial fraud is usually easy, since most creditors don’t hold you liable for fraudulent charges. These days, financial fraud is increasingly grouped into the same category as serious identity theft. The FTC combined both types in a report announcing that there were 9.9 million cases of identity theft in 2003. These crimes alone cost businesses $27.6 billion and cost consumers $5 billion directly in losses every year.

How does identity theft occur? While we like to think of identity theft as involving sophisticated technology and highly trained criminals, the fact is that most identity theft is very low tech. A majority of identity theft crimes involve check forgery, credit car misuse, and the use of information stolen from the trash. Additionally, in half of the identity theft cases committed, the victim knows the identity thief. Forget Russian mobsters: you are more likely to have your identity stolen by a friend, relative, neighbor, or in-home employee. Here are descriptions of some of the most common identity theft tactics:

• Check fraud – An oldie but goodie in the identity theft world. Printing fake checks, stealing checks, ordering checks in someone’s name, or tampering with real checks are all common tactics used by identity thieves. Since we don’t commonly think about checks being susceptible to fraud, this continues to be a popular tactic.
• Dumpster diving – Stealing important documents from a person or business’ trash can is also a common identity theft tactic. Credit card offers, bills, insurance statements, and other mail all contain a wealth of information that can be used by a thief. Consumers and companies should shred all sensitive documents before throwing them away.
• Account redirection – By filing a simple change of address form with the post office or by contacting your creditors, an identity thief can have your personal mail sent to his or her own address. Mail fraud is a federal offense, and it can have serious repercussions for both the victim (financially) and the thief (once caught). Banks and other companies now send letters to both the new address and old address when a change is made in order to stop this type of fraud.
• Internal theft – Employees or people posing as clients of loan offices, credit agencies, and companies that deal with sensitive data can steal records and use them for identity theft. Recently, ChoicePoint was the victim of a theft involving a crook posing as a client and requesting thousands of consumer records.
• Purse/wallet snatching – A majority of identity theft results from the theft of a wallet or purse. In some cases, thieves have elaborate systems that allow them to drain your accounts just minutes after they steal your credit cards. It’s vital to report a stolen credit card as soon as possible.
• Mail theft – Thieves can steal mail from your mailbox in order to get credit card applications and other sensitive data. Outgoing mail is especially lucrative for thieves because it can include bills that you are paying by check or credit card. It’s more common for mail to be stolen from apartment or housing complex mailboxes because they combine several households’ mail in one place.
• Data theft – The theft of consumer files from businesses, doctor’s offices, universities, lenders, and other such institutions is an efficient way for a thief to gather data. Many of these companies have relaxed security policies that can make it easy for a thief to steal a computer, hack into an operating system, or take actual files.
• Child fraud – Sadly, a common type of identity theft often involves stealing the identity of a child and using his or her positive credit history to open accounts. In most cases, this is done by a relative of the child who has major credit problems. It may not impact the child right away, but when he or she is an adult such fraud may result in unsuccessful credit, loan, and mortgage applications.
• Computer spyware – Computer spyware can be installed on your computer without you even knowing it. When this occurs, every word you type and website you visit can be recorded and transmitted to a thief. Installing virus protection software on your computer can help you catch this kind of fraud.
• Social Security fraud – Serious identity thieves use fake Social Security numbers, including the numbers of people who have recently died, to apply for jobs and commit other fraudulent acts. Because a Social Security number is necessary for many key transactions, immigrants and people with serious credit problems are commonly involved in this type of transaction.

What are new identity theft trends? Identity thieves are constantly working to find new ways to steal consumer data. While the tactics we already mentioned are most common, the following are new identity theft methods on the rise:

• Phishing – Almost everyone with email has received a phishing email at some point. These emails are designed to look like official messages from a bank or website, such as eBay, and ask you to update your account information. When you enter your data online it goes straight to an identity thief. Phishing can also occur over the phone when someone pretending to be your bank or credit card company calls you asking for account information.
• Pharming – In this variation on phishing, thieves set up fake websites that look like official companies in order to “pharm” consumer data. When you type in a wrong URL or when you have a specific virus on your computer, you are directed to a fake site that looks like the real one. Thieves collect information when you enter your login information and other data on this fake site.
• Skimming – Thieves use tiny hand-held credit card readers to collect the information on your credit card’s magnetic strip. Skimming is common in restaurants and stores where you turn over your credit card to pay. When a skimming device is full of hundreds of credit card numbers, these numbers can be sold or used to create fake credit cards. Skimming devices can also be placed over the normal card reader on an ATM to steal your data when you try to withdraw money.
• Wireless hacking – With more and more people using wireless internet in their homes and on their cell phones, it has also become more common for identity thieves to access personal data by tapping into these wireless connections. If your wireless network or Bluetooth system isn’t secure and encrypted, the information on your phone or computer could be stolen.

Identity theft is on the rise. In fact, it is considered the fastest growing crime in America. By understanding how identity theft occurs and by taking a few precautions to protect your identity, you can reduce your chances of falling victim to this crime. If you are a victim, you can read more about what to do in an identity theft emergency online.

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