While technology has made managing money more convenient, it has also created more opportunities for scammers to steal personal information. As a result, identity theft is on the rise and can disrupt finances, damage credit, and create a lot of stress if it happens to you.
The good news is that there are practical ways to lower your risk of identity theft and protect your financial information. Building a few smart habits into your routine can help you stay alert, catch suspicious activity early, and feel more confident about your financial security.
What is identity theft?
Identity theft happens when someone uses your personal or financial information without your permission. Scammers use stolen information like Social Security numbers, address and phone numbers, credit data, and more to open accounts, apply for loans, make fraudulent purchases and other financial crimes.
Types of identity theft include:
- Financial identity theft—when a criminal attempts to open credit cards, apply for loans, or access bank accounts using stolen information.
- Tax identity theft—whensomeone files a fake tax return using your Social Security number to claim a refund.
- Medical identity theft—whensomeone uses your information to receive healthcare services or prescription medications.
- Child identity theft—when criminals target childrenbecause their credit histories are often inactive and less frequently monitored. A Social Security number may be used to open accounts or apply for government benefits. Families may not discover fraud until years later.
- Synthetic identity theft—this combines real and fake information to create a completely new identity. For example, a criminal may pair a stolen Social Security number with a different name and birthdate.
How identity theft happens
Criminals use many methods to steal personal information. Some scams happen digitally, while others involve physical mail or stolen documents. Understanding common tactics can help you recognize potential fraud risks.
Phishing scams
Phishing scams often arrive through email, text messages, social media, or phone calls.
For example, scammers often pretend to be:
- Banks
- Government agencies
- Retailers
- Delivery services
- Utility companies
These messages often create urgency and ask you to click a link, verify account details, or share sensitive information. If a message feels suspicious, contact the organization directly using verified contact information instead of responding to the message itself.
Data breaches
Large companies and retailers sometimes experience data breaches that expose customer information. Even if you haven’t done anything wrong, your information could still be compromised after a breach.
Stolen data may include:
- Passwords
- Email addresses
- Credit card numbers
- Social Security numbers
Mail theft
While it’s fairly low tech compared to some of the other methods of identity theft, sensitive information can still be stolen from physical mailboxes.
Criminals may target:
- Bank statements
- Credit card offers
- Tax documents
- Checks
Collect your mail promptly and consider paperless statements when available.
Public Wi-Fi and unsecured networks
Never assume a public internet connection is secure. Entering passwords or financial information on unsecured Wi-Fi can increase your risk of identity theft.
If you need to access financial accounts while away from home, consider using a virtual private network (VPN) for added protection.
Ways to help protect yourself from identity theft
While no security strategy is perfect, these habits can help lower your risk of identity theft and improve your financial confidence.
- Change your passwords
It seems simple, but using a unique password for each of your online accounts often decreases your risk. Using the same login credentials across multiple platforms may give bad actors access to more than one of your accounts. - Monitor your accounts regularly
One of the best ways to catch identity theft early is by reviewing your financial activity consistently. Check your financial accounts and bank statements regularly and look for unfamiliar charges or changes to personal information. - Review your credit reports
Your credit report may reveal identity theft early. Keep an eye out for accounts you don’t recognize, unfamiliar addresses, or unauthorized credit inquiries. Monitoring your credit regularly can help you stay financially informed and in control. - Use multi-factor authentication
Whenever possible, enable multi-factor authentication. This adds an extra layer of protection by requiring a second form of verification before someone can access your account. - Be cautious about sharing personal information
Scammers often rely on panic, urgency, or emotional pressure to collect personal details. Slowing down and verifying requests can help protect you from identity theft. Before sharing sensitive information, stop and confirm what is being requested, by whom, and for what purpose. - Shred sensitive documents
Don’t overlook paper documents. Many still contain valuable personal information. Shred items like bank statements, medical bills, credit card offers, and tax documents. Proper disposal might help reduce opportunities for identity theft. - Keep your devices updated
Software updates may include security enhancements. Be sure to keep up with updates to smartphones, laptops, and tablets, along with apps and browsers. Antivirus software and locking devices with passwords or biometrics may also improve security.
Warning signs of identity theft
Sometimes identity theft isn’t obvious right away. Watch for warning signs like:
- Missing bills or mail
- Unexpected account alerts
- Debt collection calls for unknown accounts
- Unauthorized purchases
- Loan denials you didn’t expect
- Tax return issues
- Notifications about password changes you didn’t make
Catching identity theft early may help reduce long-term financial damage.
What to do if you become a victim of identity theft
If you suspect identity theft, acting quickly can help protect your accounts and credit.
- Contact your financial institutions
Notify your bank or credit card issuer immediately if you notice suspicious activity. They will often research and cancel unauthorized charges on your behalf. - Change passwords and security settings
Update passwords for any compromised accounts right away. Start with banking sites and apps, email accounts and shopping websites. Be sure to create new, unique passwords instead of reusing old ones. - Place a fraud alert or credit freeze
Fraud alerts encourage lenders to verify your identity before approving new credit applications. You may also choose to freeze your credit with the major credit bureaus for additional protection. - Report identity theft
You can report identity theft to the Federal Trade Commission at IdentityTheft.gov. This official government site provides recovery steps and personalized action plans based on your situation.
Small habits can strengthen your financial security
Protecting yourself from identity theft doesn’t require fear or perfection. Small, consistent habits—like monitoring your accounts, using strong passwords, and staying alert to scams—can help you feel more secure and confident over time.
Financial confidence starts with awareness. After all, the more you understand identity theft and how to respond to it, the better prepared you’ll be to protect your information and your future.
This article is for educational purposes only and is not intended to provide financial, tax or legal advice. You should consult a professional for specific advice. Best Egg is not responsible for the information contained in third-party sites cited or hyperlinked in this article. Best Egg is not responsible for, and does not provide or endorse third party products, services or other third-party content.
