Identity Theft

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on July 11, 2023

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What Is Identity Theft?

Identity theft is a type of fraud that involves stealing someone's personal information, such as their name, date of birth, social security number, or credit card details, for the purpose of committing fraud or other crimes.

Identity theft is a growing concern in today's digital world, where criminals are becoming more sophisticated in their attempts to steal personal information for financial gain or other malicious purposes.

Understanding identity theft is essential for individuals and businesses alike in order to protect themselves and minimize the potential damage caused by this crime.

Types of Identity Theft

Financial Identity Theft

Financial identity theft occurs when a criminal uses a victim's personal information to gain access to their financial accounts or obtain credit, loans, or services in the victim's name.

Criminal Identity Theft

Criminal identity theft involves an individual using another person's identifying information during an arrest or investigation, resulting in the victim being wrongfully associated with a criminal record.

Medical Identity Theft

Medical identity theft occurs when someone uses another person's personal information to obtain medical care, prescription drugs, or insurance benefits.

Tax Identity Theft

Tax identity theft involves the fraudulent use of a victim's personal information to file a tax return and claim a refund.

Child Identity Theft

Child identity theft is the unauthorized use of a minor's personal information for various types of fraud, such as opening credit accounts or obtaining benefits.

Synthetic Identity Theft

Synthetic identity theft is the creation of a fake identity using a combination of real and fabricated personal information, often involving the use of stolen Social Security numbers.

Employment Identity Theft

Employment identity theft occurs when someone uses another person's personal information to obtain employment, often to work illegally or evade taxes.

Types of Identity Theft

How Identity Theft Occurs

Phishing and Spear-Phishing

Phishing and spear-phishing are tactics used by criminals to trick individuals into providing personal information through deceptive emails, websites, or phone calls.

Data Breaches

Data breaches occur when unauthorized individuals gain access to sensitive personal information stored by companies or organizations, exposing the information to potential misuse.

Physical Theft

Physical theft of personal information can occur through stolen wallets, mail, or documents containing sensitive data.


Skimming involves capturing a victim's credit or debit card information using a device placed on an ATM or payment terminal.

Hacking and Malware

Hackers may use various techniques, such as exploiting software vulnerabilities or installing malware, to gain unauthorized access to personal information stored on digital devices.

Social Engineering

Social engineering refers to the manipulation of individuals into divulging personal information through psychological tactics or deception.

Insider Threats

Insider threats occur when employees or other individuals with legitimate access to sensitive information misuse their access to steal personal data.

Common Signs of Identity Theft

Unexplained Bank Account Activity

Unusual or unauthorized bank or credit card statement transactions may indicate identity theft.

Unfamiliar Accounts or Charges on Credit Report

The presence of unfamiliar accounts, inquiries, or charges on your credit report may be a sign of identity theft.

Unexpected Bills or Collection Calls

Receiving unexpected bills or collection calls for accounts or services you did not initiate may indicate identity theft.

Mail, Email, or Phone Call Scams

Fraudulent correspondence or communication requesting personal information may be a sign of identity theft attempts.

Denied Credit for No Apparent Reason

Being unexpectedly denied credit, despite having a good credit history may indicate potential identity theft.

Tax-Related Discrepancies

Receiving a notice from the IRS regarding multiple tax returns filed in your name or unreported income may be a sign of tax-related identity theft.

Identity Theft Prevention Strategies for Individuals

Secure Personal Information

Protecting your personal information is essential for preventing identity theft. Shred sensitive documents, use strong passwords, and safeguard your digital devices from unauthorized access.

Monitor Financial and Personal Accounts

Regularly review your bank and credit card statements, check your credit reports for discrepancies, and set up account alerts to stay informed about any unusual activity.

Be Cautious Online

Ensure you keep your software updated and use security features, such as antivirus software and firewalls, to protect your devices. Be wary of email and phone scams, and only use secure websites for financial transactions.

Protect Your Social Security Number

Do not share your Social Security number unnecessarily; be cautious when providing it to organizations or individuals.

Be Vigilant With Mail and Personal Documents

Regularly collect your mail and properly dispose of sensitive documents to prevent theft of your personal information.

Use Two-Factor Authentication

Implement two-factor authentication (2FA) whenever possible for online accounts to add an extra layer of security.

Identity Theft Prevention Strategies for Individuals

How Businesses Can Help Prevent Identity Theft

Implement Strong Data Security Policies

Businesses should establish and enforce data security policies to protect customer information and reduce the risk of data breaches.

Train Employees on Cybersecurity and Privacy Practices

Employees should be educated on the importance of cybersecurity and privacy, as well as the best practices to protect sensitive information.

Use Secure Payment Processing Systems

Businesses should adopt secure payment processing systems and technologies to minimize the risk of unauthorized access to customer payment information.

Monitor and Respond to Data Breaches

Companies should have systems in place to detect and respond to potential data breaches in a timely manner.

Comply With Data Privacy Regulations

Businesses should adhere to data privacy regulations to ensure they are taking the necessary steps to protect customer information.

How Businesses Can Help Prevent Identity Theft

What to Do If You Become a Victim of Identity Theft

Report the Crime

Contact your financial institutions and credit card issuers to report unauthorized transactions or accounts. File a report with the Federal Trade Commission (FTC) and your local law enforcement agency.

Protect Your Accounts

Close or freeze any compromised accounts, change your passwords and PINs, and continue monitoring your credit reports for any further signs of fraud.

Repair the Damage

Dispute fraudulent charges and accounts with the relevant financial institutions and credit bureaus. Clear your name in any criminal records and notify government agencies of any fraudulent use of your personal information.

Recover and Move Forward

Develop a recovery plan and maintain records of your actions and communications throughout the process. Stay vigilant and continue implementing identity theft prevention strategies to protect yourself from future incidents.


In today's digital world, identity theft has become a growing concern, with criminals becoming more sophisticated in their attempts to steal personal information for financial gain or other malicious purposes.

It is crucial for individuals and businesses to understand identity theft to protect themselves and minimize the potential damage caused by this crime.

Prevention strategies include securing personal information, monitoring financial and personal accounts, being cautious online, protecting the social security number, being vigilant with mail and personal documents, and using two-factor authentication.

If you become a victim of identity theft you may report the crime, protect your accounts, repair the damage, and develop a recovery plan.

By implementing these strategies and taking immediate action if identity theft occurs, individuals and businesses can better protect themselves against this growing threat.

Identity Theft FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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