What Is Identity Theft and How Does It Occur?

According to the Federal Trade Commission, more than nine million Americans are the victims of identity theft every year. The Aberdeen group estimates that it causes financial casualties to the tune of $221 billion every year. While identity thieves in the past had limited ability to obtain their victims' personally identifying information, today many use current technology to exploit their victims.

Identification

Identity theft is fraud that occurs when someone illegally obtains and uses your personal information, most commonly for the purpose of obtaining credit, goods, or services. This information can include your name, date of birth, driver's license information, Social Security number and even your address. Identity thieves may also use your credit card information or obtain credit cards or other forms of credit in your name. Federal Trade Commission statistics indicate that one in four households have experienced identity theft in some form.

Types

While identity theft is most commonly used for financial or material gain, there are several other types. Criminal identity theft occurs when an identity thief uses the victim's information to avoid arrest, to work illegally in foreign countries or to stay under the radar of creditors, authorities or other people. Identity "cloning" is a type of identity theft in which the criminal illegally assumes the identity of another person in their daily lives. Business or commercial identity theft happens when an individual or business illegally obtains goods, services or credit using the name and information of another business.

Function

Identity thieves use a number of ways to steal personally identifying information. Some use a technique called dumpster diving, in which they search through trash in dumpsters looking for papers with the personal information of potential victims. Some thieves even go so far as to submit a change of address card to the post office. This diverts the mail from the victim's home and allows the thief access to his personal information. Others simply steal purses or wallets to obtain the information.

Features

These days, some identity thieves have gone high tech. They may use a technique called skimming, which occurs when thieves use a device to obtain credit card information when you make purchases. More commonly used is a method called phishing, in which bogus emails are sent to potential victims requesting personal information. In this case, thieves often pretend to be financial institutions or trusted companies such as eBay or PayPal. Pre-texting is used when thieves contact banks, creditors, phone or utility companies or other entities under false pretenses to obtain victims' information.

Prevention/Solution

While no method is completely foolproof, there are several ways you can help to protect your identity. First, use a shredder to dispose of any paperwork containing personal information. This includes anything with your name and address on it. Be aware of what's going on around you any time you use your debit or ATM card, as some identity thieves simply look over your shoulder to obtain your pin number. Use your bank's electronic bill paying system. If you choose to mail checks, be sure to put them in a public mailbox instead of your own. Do not give any personal information including your Social Security number, credit card information or driver's license number to anyone you don't know or to anyone over the Internet (unless you've verified that the site is legitimate and secure.) Monitor your bank statements and credit card statements closely, and obtain your credit report twice a year.

Resources

• Federal Trade Commission on Identity Theft
• More on How to Protect Yourself From Identity Theft
• History of Identity Theft