Whatever you’re doing right now, stop and pay attention.
Then, hand over your social security number and date of birth.
Finally, return to what you were doing and act like nothing happened.
Seems silly, right? Well, the truth is that if you’re not actively protecting your identity, this scenario isn’t too far off base.
Admittedly, identity theft isn’t a “sexy” topic. Unless you’ve already been victimized by an identity thief, it’s likely that you won’t lay awake at night thinking about all the different ways that law enforcement is trying to crack down on this ever-increasing problem.
And it’s even more likely that you’re probably not overly excited about logging in to your newsfeed several times a day in order to read all the latest identity theft stories from around the globe.
In other words, most people don’t think about identity theft until it happens to them, at which point it’s far too late.
As such, when it comes to protecting your identity, you have to be proactive instead of reactive.
In other words, you can either take some simple steps to avoid having it stolen in the first place, or you can spend an immense amount of time cleaning up the mess after a thief has wreaked havoc on your life.
It’s ultimately your choice, but in our mind, it’s an easy one to make.
With this said, in this article we’ll take a detailed look at all things related to identity theft: What it is, the impact it has on individual lives and the economy as a whole, as well as practical, real-world steps you can take to help prevent your identity from being stolen in the first place.
And once you’re armed with the necessary information, you’ll have the power to stop identity thieves in their tracks. But first, let’s define what we’re talking about.
What Is Identity Theft? What Are The Chances it Will Happen to You?
In layman’s terms, identity theft is exactly what it sounds like: Stealing someone’s identity. According to Merriam-Webster though, a more formal definition is “the illegal use of someone else's personal identifying information (such as a Social Security number) in order to get money or credit.”
According to the Bureau of Justice Statistics, “Approximately 16.6 million persons, or 7% of all U.S. residents age 16 or older, were victims of one or more incidents of identity theft on 2012. Among identity theft victims, existing bank (37%) or credit card accounts (40%) were the most common types of misused information.” What’s telling is that, according to this report, most victims weren’t even aware their identity had been stolen until they were contacted by a financial institution about a problem with their account.
However, it’s important to keep in mind that identity theft isn’t only used to steal money from your bank account or to open up a line of credit in your name. It can also be used to steal social security and unemployment benefits, steal your tax returns, open utility accounts (e.g. electric, gas, etc.), obtain a job or government documents, and even to provide to law enforcement if one of these scammers is arrested.
What Kind of Impact Does Identity Theft Have?
You might be thinking to yourself, “Ok, so 7% of the U.S. population had their identities stolen in 2012. That seems like a pretty small number. What’s the big deal?”
The reality is that ID fraud results in a damaging trickle down effect that not only harms the consumers who fall victim, but also to the businesses that serve them. Let’s take a closer look at why this is.
The Impact of Identity on Individuals
According to the BJS report noted above, “Direct and indirect losses from identity theft totaled $24.7 billion in 2012. Of those who reported a direct financial loss, victims who experienced the misuse of their personal information reported a mean direct loss of $9,650 and a median direct loss of $1,900. Victims of new account fraud incurred an average loss per incident of $7,135 and a median loss of $600.” And here’s the key issue: Of these victims, 29% spent a month or more resolving the problem, and 36% “reported moderate or severe emotional distress as a result of the incident.”
What this means is that not only can you potentially lose a lot of money as a result of identity theft, but you can lose a lot of time putting your life back together as well. And when it comes down to it, you can replace money, but you can’t replace your time.
The Impact of Identity Theft on Businesses
According to an infographic published on Mashable.com, “The potential amount of money in the US affected by 2009 Frauds amounts to $54 Billion. Worldwide, businesses lose $221 Billion yearly to identity theft.” To put this in perspective, this is more than the GDP of many countries around the world. But the truth is that, while this is certainly a big number, most large businesses and corporations are able to absorb the losses caused by identity theft.
On the other hand, the sad reality is that ID fraud is much more damaging to small businesses, who often depend on every dime they receive in order to keep their operations afloat. And when ID theft occurs, they’re not only out time and money, but physical product as well. On top of this, small business owners can have their credit worthiness impacted as a result of identity theft, which means that they may not be able to obtain the loans they need in order to remain in business.
How Can You Protect Your Identity from Being Stolen?
To put it bluntly, if you’re not taking active measures to protect your identity from would-be thieves, ask yourself this: Can I afford to lose $10 grand and a month or more of stress and frustration? If the answer is no, then keep in mind that if your identity is stolen and you incur some type of financial loss, the onus is on you to prove you’re who you say you are, and that you don’t owe this money. While the thieves will walk away with tens (and sometimes even hundreds) of thousands of dollars in merchandise, you’ll be left with the immense stress of cleaning up your life.
However, simply monitoring your credit report isn’t enough. Instead, you need to take proactive measures in order ensure that identity theft doesn’t rear its ugly head in the first place. As such, here are some simple tips you can use to accomplish this.
1. Don’t Give Out Your Information Willy-Nilly
Be careful who you give your social security number to. This includes filling out paperwork at the doctor’s office, car dealership, and even public schools. If you’re unsure, specifically ask what your social security number will be used for and how it will be stored in their system. In addition, if you’re filling out an online application, make absolutely sure the connection is secure (usually indicated by a simple lock image in the upper left-hand corner of your browser).
With this in mind, let’s talk about some other online practices you should get in the habit of using.
2. Practice Tried & True Online Safety Habits
As we mentioned in our recent article, it’s a wise idea to never open emails from people you don’t know, and unless you’re expecting something from someone you do know, to never open any attachments or download any files, regardless of your age. This is because people looking to steal your identity will often attempt to install spyware on your computer, which will give them access to much of your personal information.
In addition, you should download and install antivirus software that includes a firewall, and it’s always a good idea to avoid entering your personal information (including account usernames and passwords, which should be changed often) after clicking on a link in an email. Otherwise, you may fall victim to a phishing scam, which is where fraudsters will mimic legitimate websites (e.g. your bank) in order to steal your information.
3. Think Before You Toss
Next, despite many of the warnings you’ll hear about online safety, the reality is that “dumpster diving” is the most-used—and most effective—way of obtaining someone’s personal information.
Because of this, you should purchase an inexpensive shredder that you can use to destroy any personal, medical, or financial-related paperwork before throwing it in the trash, including checks, pre-approved credit card applications, and bills.
4. Third-Party Companies
In addition to the above, there are several third-party companies that can monitor your identity on your behalf, and alert you any time there appears to be a breach. While these companies will charge a fee for their services, they can often be invaluable tools, especially by providing you with a “one stop ID theft protection shop” and saving you time.
5. Keep Your Expectations Realistic
While the above methods can greatly reduce the risk of your identity being stolen, the sad fact of the matter is that, regardless of how diligent you are, there are no assurances it will never happen to you. Why? Because your information is used in so many places in the modern era that it’s almost impossible to keep it away from determined criminals.
In fact, according to this website, “Over 200 million people have had their identities compromised in a corporate data breach since 2005. There is no way to prevent this event from happening.” If you’ll recall the most recent example of this when more than 110 million Target customers had their data stolen in early 2014.
Another related method of stealing your information is through skimming, which is where criminals attach small devices to credit card terminals that store your card numbers after you swipe.
What Can You Do If Your Identity Has Already Been Stolen?
If you’re unfamiliar with some of these tactics and find that someone has stolen your identity, what can you do to minimize the damage?
First, the FTC recommends that you immediately contact each of the three credit reporting bureaus and file a fraud report. Next, you should order copies of your credit report from each of these agencies, followed by compiling an Identity Theft Report. This will include filing a complaint with the FTC, as well as submitting a police report to your local precinct.
From there, it’s just a matter of contacting all the companies from which the thieves purchased goods, and clearing your good name one by one. After obtaining copies of the documents the thieves used at these businesses, you’ll need to send them a copy of your Identity Theft Report.
In instances of widespread use of your information, you’ll likely contact numerous businesses, so it will be a good idea to record the dates you made the calls, document the names of the employees you spoke to and details of the conversations, as well as to keep copies of any paperwork in your files.
In addition to the above, we’d strongly recommend reading through the FTC’s Taking Charge of Identity Theft document, which will take you step by step through the process.
If you have firsthand experience with identity theft, whether you’re a victim or an industry professional, why not share your knowledge with the world? The great news is that you can help other consumers become more informed by leaving a comment below!