Online Identity Theft: What Is It And How To Protect Yourself?

By Mike Darrow
Online Identity Theft And How To Protect Yourself

Online identity theft is a big problem in this digital age and has the fastest-growing crime rate in developed countries, chiefly the U.S. More than ten million Americans have their identities stolen each year, and the average financial loss per incident is just over $6,000. So far, at least 700 million personal records have been compromised, according to the FTC. If those online identity theft incidents spread equally across the U.S citizens, each person would have had their identities stolen more than two times.

For cyber thieves, users' personal information is a goldmine. Such data are first name, last name, address, phone number, email address, password, social security number (SSN), banking information, credit card details, and so forth. Cyber thieves use them for fraudulent transactions and other criminal activities. They also can sell your information to third parties that will use it to gain benefits themselves.

The worst cases of such theft include damage to your reputation or rejection of loan applications for your house or car. Online identity theft can also cause severe damage to your credit scores. Online identity theft may cause tremendous damage, cost you much money and might take months or even years to resolve. Many people have even been arrested and held in custody because cybercriminals used their identities to perform fraudulent activities, making the authorities think that they were the criminals.

In case you haven't actively begun protecting your identity on the internet, you should start doing so right now. But what can you do to prevent cyber thieves from stealing your information?

What Is Online Identity Theft?

Online identity theft is any type of scam or crime that results in the loss of personal data, which is then used without your permission to conduct fraudulent transactions or other criminal activities over the internet. The most commonly used method is to steal users' financial information and withdraw money in multiple ways.

Worse than that, criminals can use your personal information to obtain cash loans or perform payments that are based on your reputation, such as Bill Me Later. You may not lose your money or repay loans if you can prove that you didn't commit those transactions, but it will take much time and cause a lot of trouble. Furthermore, your reputation may be compromised, which will make it difficult for you to apply for a loan application in the future.

Once cybercriminals steal your identity, some things they can do include:

1. Credit Card Fraud

Online Identity Theft - Credit Card Fraud

When someone has your credit card information, they can use it to conduct transactions you didn't authorize. This activity is called credit card fraud and can happen in different ways:

  • If you lose your credit card or someone has stolen it physically, this credit card can be used to commit transactions, either over the internet or in retail stores through POS terminals. If your PIN code is also stolen, your credit card can easily be used to withdraw cash at ATMs.
  • Criminals can also steal your credit card number and security code (often called CVV or CVC) to make unlawful transactions on the internet.
  • Online identity thieves can also use your personal information to open new credit cards and then withdraw money without your awareness. This type of unlawful activity directly affects your credit card score. Sometimes, it's difficult to detect this type of identity theft. You only find out when you receive a notice paper of bad debt or get denied when opening a new credit card.

Pay attention to your credit card, and don't forget it anywhere. You should call the credit card company and lock your card immediately if you find out that it has been stolen. These necessary steps will help you to avoid unnecessary risks.

2. Loan Fraud

Online Identity Theft - Loan and Payday Loan Fraud

Many loan agencies and even banks only require simple information in their lending application process and have a sketchy approval application process. This inadvertently helps identity thieves to get quick loans easier without much verification.

With the necessary information, cybercriminals can obtain cash in your name with payday loan programs (usually up to $1,000). Or worse, they could open up a legitimate house or business loan with enough stolen details. You may not discover these illegal activities until loan collectors are aggressively asking for a payment. A larger loan could have an even bigger impact, which damages your credit history and builds debt.

3. Steals Money From Your Bank Account

Online Identity Theft - Steal Money From Your Bank Account

Taking money from your bank account is possible when cybercriminals have enough personal details. For example, they can regain your login ID and password of your bank account and use it to transfer money out. In case it's impossible to transfer money out of your account, they can send a paper check to third parties, and they will cash the money out. They can also request your bank to ship a new credit card or debit card and use them to withdraw the money.

Besides, there are many payment services that use a bank routing number and account number to perform a payment. For example, you can link your bank account into a Paypal account and use it to send money to others. The money you send will be taken directly from your bank account. Therefore, identity thieves can do the same as you do and use your money. There are, of course, some security measures from Paypal.com, but they may not make it difficult for someone who has access to your bank account.

So as you can see, there are many ways that cybercriminals can steal your money when they have permission to access your bank account.

4. Steal Your Tax Refund

Online Identity Theft - Tax Refund Fraud
Image Credit: Flickr.com | Pictures of Money

Did you file your own taxes this year? You realized that someone has filed your taxes in your name and collected the tax refund money. You certainly are not the only victim of this type of illegal activity. IRS has detected many criminals that have used stolen identities to try to claim billions of dollars in tax refunds. In 2016, the IRS kept $10.5 billion out of identity thieves' hands, but they got at least $1.6 billion.

Along with the growth of electronic filing, scammers can file a larger number of fraudulent tax refund applications with fewer efforts. Although the IRS tried to detect and void a large number of illegal tax returns, this criminal activity may not be coming down any time soon. Therefore, if you have received a notification from the IRS telling you that more than one tax refund has been filed in your name, or if you suspect your identity has been used fraudulently, report the issue to the IRS Identity Protection Specialized Unit, as well as the police right away.

5. Medical Insurance Fraud

Online Identity Theft - Medical Insurance Fraud

This form of identity theft is less known, but the outcome can be just as damaging. Medical identity theft occurs when someone unauthorized takes and uses a patient's PII to bill for therapeutic goods, drugs, or services fraudulently. It also includes illegal insurance benefits, government benefits, employment, or other financial gains by using another individual's PII. Medical identity theft does not only affect the patient but also healthcare and insurance providers.

Note: PII stands for Personally Identifiable Information.

Medical care data is increasingly becoming a top target for cybercriminals in the U.S and globally. Unlike financial data that has a finite shelf life and loses its worth immediately after the victim notices the frauds and then freezes their bank accounts or credit cards, this type of data has abundant potential and longer lifespan. Medical care data contains information that can't be changed or as quickly as credit cards.

6. Selling Your Information To Other Criminals

Sell Personal Information On Black Market
Image Credit: CNBC.com

Nowadays, criminals can easily buy and sell personal data on underground forums or the Dark Web. The most common things that criminals often buy and sell are stolen credit cards and other financial information. But sometimes, they also buy and sell social security numbers (SSNs) and the most intimate details of the personal life of users.

Ever wondered how much your information is worth to criminals? It depends on the type of information and a variety of other factors. A recently published report from VPNOverview.com seems to answer all the questions in-depth.

How To Protect Yourself From Online Identity Theft

Online identity theft is a serious problem and causes enormous financial losses for individuals and businesses. In this digital age, there are many ways a fraudster can get your information. So what can you do to prevent your data from getting stolen?

It might be somewhat easy to recover from simple online identity theft cases, for example, credit card frauds. However, it's more challenging to overcome complicated online identity theft forms. The worst thing is that you are not even aware of how or when someone steals your information. Therefore, it's always better to use proactive approaches to protect your online identity.

The first critical step in protecting yourself from online identity theft is awareness, which means being able to determine and recognize online identity theft.

Below are 11 useful vital steps you can use to prevent online identity theft:

1. Use Antivirus & Anti-Malware Apps

Use Antivirus and Anti-Malware Apps

The first step to protect your online privacy is to secure your computer. It's a place that you store personal data and do financial activities. That's why you must keep it safe, stay away from malicious programs, which can steal your information and send it to thieves.

Using both antivirus and anti-malware apps will aid to fight against the most dangerous malicious programs that can affect your computer. A good antivirus program can handle most kinds of viruses and malware, and prevent attackers from using spyware to steal data. Anti-malware, on the other hand,  will act as an extended protection layer in case the antivirus software failed to eliminate malicious programs.

For more information on the best antivirus and anti-malware software, check out our latest article on that topic.

2. Protect Your Smartphone

Protect Your Smartphone

As well as protecting your computer, you should be cautious with your smartphone as it can be a source that leaks out your data. Many leaked sensitive images and videos come from smartphones. The majority of data leakage cases are caused by spyware; the rest is because of users' mistakes. These spyware programs often come included with mobile apps that you download from unknown sources. For that reason, you should reconsider before downloading apps from outside the official application stores. Besides, always use a good antivirus or anti-malware app to safeguard your smartphone.

In addition to hardware and software factors, the way you use your device is also a risk of personal information leakage. For example, use a weak passcode, use public Wi-Fi subjectively, don't often install updates, surf websites and download everything without security knowledge, and much more. Make sure to read our latest guide on how to protect your smartphone from hackers and identity thieves.

3. Install Latest Software And Operating System Updates

Install Latest Software and Operating System Updates

Software or even operating systems aren't flawless and have many vulnerabilities that are still undiscovered yet. That's the reason why developers release updates frequently to patch these security flaws.

For that reason, you should install updates regularly to prevent any intrusion from attackers. If you don't update your software or system, it looks like a house without the door lock.

4. Use Strong & Unique Passwords

Use Unique and Strong Password To Avoid Online Identity Theft

Cybercriminals are hoping that you use the same password for all online accounts. Because once they obtain this password, access to the rest of your accounts is as easy as eating a pancake.

For instance, someone somehow steals your email and its password. When this thief accesses it and realizes that you also have a Paypal and online banking accounts, the first thing this person will do is to try access both accounts with the email's password. Everything will be fine if you use different passwords for these accounts. However, if you use the same password for both of them, it's a goldmine for this stealer. That's how your money has been stolen!

To stop online identity theft and protect your sensitive data, use a unique password for each account. Also, creating a strong password that's difficult to figure out, is considered as an extra security layer to protect your accounts.

Quite hard to remember all the passwords? Tools like LastPass can help you to remember thousands of passwords without any issue. It also comes with a password generator that will assist you in generating the most robust passwords. Besides using strong passwords, you should also enable 2-step verification on critical accounts if it’s supported.

5. Visit HTTPS Websites For Safe Online Purchases

Always use HTTPS websites when making payments or purchasing online

Make sure you always perform purchases or payments on secured and trusted websites. The address of websites that start with HTTPS and has a padlock icon in the front are two signs you can use to recognize them. If an online shopping website doesn't use the HTTPS protocol, skip them and find an alternative. Or when you visit a website but your web browser displays something, for example, "Your connection is not private", "Your connection isn't private", or "This connection is not secure", and so forth - then you shouldn't go further. It's not safe for you when you lack knowledge in this section.

6. Use Reputable Websites When Making Purchases

Always Use Reputable Online Shopping Websites To Avoid Online Identity Theft
Image Credit: Getty Images

There are thousands of online shopping websites out there, including both big companies and small brands, but which one is safe to use? Many people have asked the same question as you do, and in most cases, the answer points back to popular shopping websites like Amazon, BestBuy, Walmart, Costco, or Target.

But what about some of the smaller retailers? Are they legit? Is it safe to shop there?

In fact, it's hard to figure out because you couldn't know whether any of them are capable of stealing your information. Our advice is to purchase the products you want from top-rated shopping websites. If you have no other choice, use Paypal.com to send the payment. It helps to prevent cybercriminals or even fake shopping websites from stealing your money.

7. Use Prepaid Credit Cards For Risky Payments

Prepaid Credit Cards

Prepaid credit cards work like regular credit cards, but the credit limit relies on the pre-loaded money. These cards are the best solution for risky payments.

Let us give you an example!

One day, you found the product that you like most on a small online store. However, they don't accept Paypal as the payment method or support C.O.D.

What would you do? Risk your credit card and proceed with the order? 

That's not a wise choice at all. Why don't you apply for a prepaid credit card, load the exact amount of money that the order needs, and then make the payment? It's completely safer, and there would be no future risk. Even if this prepaid credit card information is revealed or stolen, it will not affect you much because the card does not have available money to use. Every time you want to pay for something with this card, you need to deposit money into it first. So that's the reason why prepaid credit cards are the best solution to avoid criminals from stealing your money.

8. Hide Your PIN When Using ATMs

Hide your ATM PIN to protect your bank accounts and credit cards
Image Caption: Hide your PIN when using ATMs to protect your bank account.

Do you often withdraw money from ATMs? Even if you don't do this regularly, you should use one hand (or something else) to cover the keypad when entering your PIN. It's possible that someone is watching over your shoulder or a little camera, which was installed by criminals, is recording your PIN. What's worse is that you can't know when and where these horrible situations happened. So it's better to protect yourself first.

9. Never Give Your Personal Information

Your Personal Information

This doesn't mean that you shouldn't provide your personal information when requested by authorities. It means you should be wary of scammers that pretend to be people of the investigating authorities and require you to give your personal information to steal your identity and obtain profit from it.

The fraudsters also pretend to be people from the bank and ask you to provide bank account or credit card information to verify the account, confirm transactions, or some other convincing reasons. However, you should be cautious about these situations. Banks and credit card companies will never ask you to give sensitive information over the phone.

10. Protect Your Social Security Number

Protect Your Social Security Number Card
Image Credit: James Buchan | Flickr.com

Your social security number (SSN) is the most critical information that you must protect because it can be used for many purposes. When someone has your information with SSN, they could potentially open credit cards, apply for loans, or even file tax refunds, and so on.

You should not reveal this information to anyone, never store or send it over email or messengers, as well as never keep it on your computer or smartphone. You can accept that your basic personal information is exposed, such as name, address, date of birth, email, and so forth, but SSN can't. In case your social security number is exposed or stolen, you can apply for a new number to avoid future risks.

11. Monitor Your Credit Score

Monitor Your Credit Score To Avoid Online Identity Theft

You couldn't know when your personal information will be stolen, but you can partially track when a thief uses it by monitoring your credit score.

What's the credit score?

The credit score is also called Fair Isaac Corp. score or FICO score. It's a three-digit number between 300 and 850 to measure individual creditworthiness. The higher your score, the higher your credit credibility. Equifax, Experian, and TransUnion are the three leading credit reporting agencies that purchase the formula from Fair Isaac Corp.

These agencies use your data and handle the numbers differently. Therefore, your credit score will be slightly different at each agency. When lending companies consider your loan application, they check your credit score from all three credit agencies above, for your reliability as a borrower.

How can you monitor your credit score?

All three credit reporting agencies have joined together and allowed people to get their free annual credit reports in three ways:

  • The annualcreditreport.com website.
  • Toll-free telephone number: 1-877-322-8228
  • Regular mailing address: Annual Credit Report Request Service, P.O. Box #105281, Atlanta, GA, 30348-5281, USA.

By law, you can request one free copy of your credit report from each of the credit reporting agencies every 12 months. This report is a summary of borrowing and repayment activities. Any activity related to your accounts, loans, mortgages, credit cards, unpaid bills, late bills, and other financial activities will be shown.

Banks, lenders, insurers, employers, as well as other businesses can buy the information in your credit report from the above agencies and use it to evaluate your applications for opening credit cards, purchasing insurances, applying for jobs, or renting a house.

Back to the main story, it seems one report per year isn't enough to protect you from online identity theft. Therefore, you will need a premium service such as LifeLock, TrustedID, or PrivacyGuard. They usually offer at least one credit report per month and monitor your credit history for unusual activities daily. For example, when someone steals your social security number and sign up a new credit card or apply for a loan, you will get a notification from these premium services on the same day.

In our opinion, this is a great way to secure you from online identity theft, despite the fact you have to spend additional money, which is roughly $10 - $20 per month for these credit monitor services.

Great, right? What do you think? Is this enough to protect your identity? Do you ready to spend this amount of money on securing yourself?

In Summary

To better protect your personal information, your awareness is a critical factor. You must recognize the importance of protecting your identity and sensitive data. You also need to understand how identity thieves can steal your information, how they use it, and how to prevent this from happening.

The primary goal is to build as many effective obstacles as you can to block the thieves from reaching out to your data. These obstacles may partially frustrate online identity thieves and push them toward other victims whose data is more effortless to obtain fraudulently.

Besides, in case of stolen identity, you can put a request to three credit reporting agencies that we have mentioned above to freeze your credit score. This step allows you to fully take control of your financial information by telling credit reporting agencies not to release your credit score and detailed reports to other parties. With this action, banks, lenders, or other financial companies will be unable to check your credit score and report. This is a strong move to assist in keeping cybercriminals from opening new credit accounts under your name in case your social security number has been exposed during a data breach.

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