Identity theft and financial losses from the fraudulent use of consumers’ personal data are soaring.
The latest annual study of identity fraud by Javelin Strategy & Research found that over 42 million U.S. adults were victims of identity fraud in 2021, and financial losses totaled $52 billion.
“Criminals reverted to pre-pandemic tactics in 2021 by focusing on virtual attack vectors such as bots, malware and a variety of identity fraud scams,” John Buzzard, lead fraud and security analyst at Javelin and author of the report, said in a press release. “Further, the 2021 data has shown criminals will change strategies to evade detection and maximize the amount of information they can extract from victims.”
It takes awareness, vigilance and the right tools to avoid becoming a victim. Here are steps to take.
12 steps to prevent identity theft
Here are some ways to prevent identity theft and fraud.
1. Safeguard foundational identity documents
Your Social Security card, birth certificate, driver’s license, passport and military discharge papers are among critical identification documents that should be well protected.
With the exception of a driver’s license, you should not carry these documents with you. The same goes for insurance papers and tax returns. Keep them in a home safe or a safe deposit box and make electronic backup copies.
“It’s important to have those documents and know where they are,” says Eva Velasquez, president and CEO of the nonprofit Identity Theft Resource Center.
2. Freeze your credit
When you apply for a loan, the lender checks your credit history. But when you freeze your credit, no one can access your credit files at the major credit reporting bureaus of Equifax, Experian and TransUnion — not even you, unless you lift the freeze.
A credit freeze can prevent a criminal from opening an account or taking out a loan using your personal data. A credit freeze is free and your credit cards, accounts and automatic payments continue to function.
3. Read financial account statements
Carefully read bank and credit card statements. If you frequently shop online at places like Amazon, it’s easy to lose track of charges and overlook irregularities on your credit card statement.
Devise a system to keep track of purchases. Retain purchase confirmation emails until you have matched them up with your monthly account statement.
4. Check ‘explanations of benefits’ from your health insurer
The cost of doctor visits, screening tests, surgeries and other health care you receive is itemized in a form called the ‘explanation of benefits,” or EOB. Insurers send EOBs to customers to explain how much the insurer paid versus what the patient owes.
Look for charges for medical services you did not receive and other irregularities. Health care was a leading sector for data breaches, according to the Identity Theft Resource Center’s 2021 data breach report.
5. Use complex passwords and two-factor authentication
Passwords should be different across all accounts, contain at least 12 characters and be complex — not words, phrases or numbers that might be easy to guess.
For example, don’t use your dog’s name, especially if you share information about your pet on social media. A password manager is a good tool to generate, retrieve and securely store strong passwords.
Two-factor authentication adds another layer of security. An example is when you sign in to an account with a login and password and you are sent a text message with a numeric code you must enter to access the account.
6. Monitor credit reports
Credit reports tell you what accounts you have, your balances and payment history. Lenders use them to decide whether to extend you credit. Landlords and employers sometimes look at them before deciding whether to lease you an apartment or make a job offer. Look for accounts you didn’t open and other errors or oddities in your reports.
The major credit reporting bureaus are giving consumers free weekly access to their credit reports. You can get your reports at AnnualCreditReport.com. Consumers normally are allowed one free credit report per year from each of the three reporting bureaus.
7. Collect mail every day
Don’t let mail pile up in your mailbox. Even junk mail with your name and address on it can be used to put in a fake change of address and have your mail redirected to a criminal. Put a hold on mail delivery when you go on vacation.
Use the U.S. Postal Service’s Informed Delivery email notifications so you know if mail you’re supposed to receive doesn’t arrive.
Shred unwanted mail, especially prescreened credit offers. Be suspicious if you stop getting mail, especially bills and account statements.
8. Get into the shredding habit
Don’t toss unwanted mail and other papers with your name, address or other personal data into the garbage.
Not all identity thieves are high-tech. Some will go through trash. Get into the habit of shredding unwanted mail and any paperwork that contains identifying information.
9. Be on guard against phishing, smishing and vishing
Identity thieves are often imposters who use emails, text messages and phone calls to get your personal data and your money.
- “Phishing” emails appear to be from an authoritative source like your bank or credit card company but may contain attachments with malware.
- “Smishing” text messages try to lure you into giving up personal information or have links to fake pages.
- Phone callers who tell you they’re from the IRS and you owe money or they’re from Microsoft and your computer needs an update or repair are “vishing.” Never reveal personal information or send money to unsolicited callers.
Identity thieves also prey on people looking for jobs. Posing as legitimate employers or job placement services, they induce people into filling out applications and other forms requesting valuable personal information or sending money for fake certifications and service fees. Do research on these “companies.” Alarm bells should go off if an employer wants you to pay them for a job.
10. Scrub electronic devices before getting rid of them
Make sure personal files and data on computers and smartphones are securely erased and cannot be recovered before selling, recycling or donating them. Merely deleting files isn’t sufficient. Data can be restored from a recycle bin or recovered with the right tools.
Search online for articles and videos on how to scrub your devices. If you’re not comfortable with that, find a trustworthy techie to do it for you.
11. Set up transaction alerts and use digital wallets
Many financial institutions let you sign up for texts or emails that notify you when purchases, withdrawals and other account transactions are made. These can serve as early warning signals if something is amiss.
Making purchases with digital wallets, which are apps that are digital versions of debit and credit cards, is safer because each transaction generates a unique, random, one-time code and your account number isn’t transmitted during the transaction. Your data is encrypted. Digital wallets also eliminate the need to carry cards and risk losing them.
12. Be aware of your surroundings
In a high-tech world, there are still pickpockets who can fleece people on trains and crowded streets and “shoulder surfers” who eavesdrop as people give out a credit card number or Social Security number over the phone.
When you leave a store or restaurant, make sure you haven’t left your credit or debit card on the table or your smartphone in the restroom. Don’t leave a handbag in a shopping cart while you look at something that interests you.
Stay alert and don’t think identity theft can’t happen to you. If you’re a parent, teach your children tips and how-to’s to avoid ID fraud.
Identity theft can be a costly nightmare requiring an exhausting effort to undo, so it’s hard to be too cautious about guarding your personal information.