Identity Theft: How to Reduce Your Risks
Identity Theft: How to Reduce Your Risks
Identity theft is one of the fastest growing crimes of the 21st century – and may be the most frequent and costly. The U.S. Department of Justice Bureau of Justice Statistics estimates that in 2014 over 17 million Americans had their identity stolen. This means roughly seven in 100 adults experienced a loss from identity theft!
While identity theft is often associated with the compromise of a credit card or bank account, this is actually the least severe type. Most financial institutions indemnify the victim if they experience a loss. However other types of identity theft can be more difficult to remediate: unauthorized opening of a credit line, or using your identity for insurance purposes or for legal trouble – to name a few. Some of these crimes can have long-term consequences and even impact future employment or insurance ratings.
Types of Identity Theft
We think of financial theft as the type of ID theft that people worry about most. Specific crimes can include:
- Compromising your credit card number
- A loan taken out in your name
- Opening of a credit card or loan to purchase a big ticket item using your identity
These actions can cause bad credit for the victim, resulting in higher interest rates or denial of loans. Depending on the specific action or amount of money involved, it can be time-intensive to remediate the issue.
Tax-Related Identity Theft
Tax-related identity theft is the largest and fastest growing type of ID theft, according to the Federal Trade Commission, with an estimated 50 percent year-to-year increase in 2015. It occurs when a criminal uses your Social Security number to file a tax return claiming a fraudulent refund. These types of cases can be highly complex and cause a major delay in your refund.
Criminal theft is when your identity is stolen and used to commit further crimes. If this happens, you could have an unknown criminal record sneak up on you. You could even have your name show up on a sexual offender list or terrorist watch list. You may not realize your identity has been compromised by criminal theft until a background check is run when you apply for a job, a passport, etc.
Medical Insurance Theft
Medical insurance theft is a dangerous crime that is on the rise. It occurs when a criminal uses your name to obtain medical treatment. The illness or condition the criminal claimed would then appear in your medical records. It may result in increased health insurance premiums or life insurance ineligibility.
Driver’s License Theft
Driver’s license theft can result in unpaid tickets, accidents, or even worse, DUIs recorded in your driving record. Depending on the severity of the situation, you could lose your license, experience a hike in insurance costs, or suffer from bad background checks.
There are a number of credit monitoring programs that simply notify you after fraudulent activity has occurred. Other programs, such as identity theft monitoring programs, may include a service that monitors the internet, social media, public reports, medical records and commercial databases. While these programs may be valuable, we believe the most effective measures to prevent identity theft are ones that you can take yourself.
How to Prevent Identity Theft Yourself
While there is no sure way to prevent identity theft, you can greatly reduce the chances of a criminal opening a new line of credit in your name. We suggest freezing all three credit reports. In doing so, creditors can’t pull your credit unless you unlock your credit report. You need to unfreeze your credit when you apply for a credit card or loan, or even subscribe for a new wireless phone service. Freezing your credit reports comes at a small one-time cost, however we believe it to be the most effective way to reduce the risk of financial identity theft.
The following list includes other risk-limiting measures we recommend:
- Do not give out your personal information unless you know who you are working with.
- Shred all documents that contain personal information.
- Create complex passwords for all online activities and be sure to use anti-virus software and firewalls.
- Do not ever use your credit card or social security number on a website that is not secure. You can tell the website is secure if the URL begins with “https”, as opposed to “http”. The “s” stands for secure.
- Do not carry your social security card in your wallet.
- File your taxes as early as possible to try to prevent tax-fraud.
- Create an account at irs.gov if you do not already have one.
- Never respond to phone calls or in-person visits from anyone claiming to be from the IRS or individuals claiming to be from a financial institution. The IRS will always begin any formal contact by way of a formal letter. If the inquiry is from your financial institution, you should contact them directly by going to a local branch or using a phone number that is verified by your institution.
- Order your credit card report at least annually, if not more frequently. Federal law allows you to get one free credit report from each of the three credit bureaus for free each year. Only do so directly through the credit bureaus or at annualcreditreport.com.
Sources: US Department of Justice, Federal Trade Commission, Internal Revenue Service.
Disclosure: This article contains general information that is not suitable for everyone. This is not an endorsement of service providers and we assume no responsibility for any information, advice or services provided. Strategic Wealth Partners (‘SWP’) is an SEC registered investment advisor with its principal place of business in the State of Illinois. For additional information about SWP, including fees and services, send for our disclosure brochure as set forth on Form ADV from SWP using the contact information herein. Please read the disclosure brochure carefully before you invest or send money (https://www.stratwealth.com/disclosure-statement).
Date Published: 5/18/2016