Identity theft is skyrocketing, doubling in frequency since 2019 to become the second most reported complaint according to the Federal Trade Commission. Almost every American today has had their personal information breached at least once, and chances are you will experience an effort to steal your identity at some point, perhaps more than once. time. But there are steps you can take to mitigate the risk and act quickly to repair the damage in case you eventually become a victim.
As long as human beings have maintained unique individual identities, scammers have sought to get away with them. Early brutal examples involved the murder of the victim and the impersonation of their physical identity by the criminal in order to evade the law or former associates. Financial fraudsters literally rummaged through trash cans or created elaborate phone schemes to get enough information from the victim to liquidate their bank accounts. But it took the advent of the Internet to fuel the dramatic increase in large-scale, sophisticated identity theft.
The term “identity theft” was first used in 1964 and is defined as a crime in which someone wrongfully obtains and uses another person’s personal data in a way that involves fraud or deception, usually for personal gain. According to the FTC, 1.4 million cases of consumer identity theft were reported in 2021, but industry analysts estimate that up to 90% of cases go unreported. Javelin Strategy and Research estimates that 42 million Americans were affected by identity fraud last year, resulting in losses of $52 billion.
It is impossible to completely inoculate yourself with this type of crime given the plethora of personal information about each of us that circulates in the ether. According to a former hacker turned security consultant, the only reason more people haven’t been victimized is that there just aren’t enough criminals to use all the data out there. Yet there are several steps each of us can take to minimize the risk of attack.
* Freeze your credit. A credit freeze prevents any potential creditor from accessing your credit report unless you are already a borrower. By law, each of the three bureaus (Experian, TransUnion and Equifax) offers this service free of charge by creating an account and enabling or disabling the real-time freeze. It’s easy and it’s the strongest defense against fraudulent accounts being set up in your name.
* Watch your credit. Consider signing up for one of the many free basic credit score monitoring services that provide access to your credit report and alert you to changes. Several companies, including Credit Karma, Credit Sesame, and SoFi, offer basic free offerings. Many credit card issuers now also offer free access to your Fico score. And by law, you’re entitled to a free report from every bureau on AnnualCreditReport.com.
* Correct your passwords! According to LastPass, 91% of consumers know that reusing passwords greatly increases the risk of theft, but 66% do it anyway. Strengthen your passwords and make them unique. A password manager app can do this for you and even change them periodically. Also enable two-factor authentication (email or SMS verification) where possible.
* Review statements. Beyond the credit freeze, the best protection is vigilant monitoring. Carefully review bank and credit card statements for any unknown or unexpected activity and contact the institution promptly if you see anything suspicious.
* Identity protection services. Subscription monitoring and mitigation services are now a $10 billion industry. Paid services may be worth the cost if you are not inclined to do the work yourself or think you may not be diligent enough. However, it is important to understand that despite their names, these services cannot actually “protect” you from identity theft. Many, for example, advertise Dark Web monitoring for your personal information, but note that they cannot delete or block the data they find and cannot stop identity theft, but can provide a warning that your information is for sale and can help recovery following a theft.
Most identity monitoring subscriptions also offer some degree of insurance coverage to reimburse the cost of repairing a breach and, in some cases, recovering lost assets. Note, however, that you may be able to add similar coverage to your home insurance policy for less.
What to do if (when) this happens to you
One of the most useful and lesser-known resources is the Federal Trade Commission’s identity theft website at IdentityTheft.gov. As soon as you suspect your identity has been stolen, report the incident to the FTC’s Fraud Department. Then change your critical logins and passwords and request your credit report from all three bureaus. Even better, IdentityTheft.gov will create a custom recovery plan to guide you through the steps of securing your accounts. Repairing and securing your profile after identity theft takes considerable effort, but if detected and reported early, it can usually be resolved within 6 months without permanent damage.
With the massive amounts of personal data in circulation, we are all at significant risk from identity thieves. Taking a few simple precautions can greatly reduce the risk of theft and facilitate quick recovery if it does occur.
Christopher A. Hopkins is a Chartered Financial Analyst and co-founder of Apogee Wealth Partners LLC