What is identity fraud, and how to protect yourself from it

What is identity fraud?

Identity fraud is a type of crime where stolen personal information, such as a Social Security number or credit card, is used to create fake transactions or accounts. It can also include other forms of fraud, like forging medical records, filing false tax returns, or misrepresenting employment details.

In every type of identity fraud, a criminal steals information from a victim to create fake documentation and then commits a theft of some kind. Identity theft is a serious crime that almost always results in financial and personal consequences for the victims. 

What is the difference between identity fraud and identity theft?

Identity theft and identity fraud are different terms but are often confused with each other. The main differences are: 

• Identity theft is the criminal act of stealing a victim's information such as names, birthdates, addresses, credit card numbers, bank account numbers, or Social Security numbers. 
• Identity fraud is using that stolen information to commit crimes, including creating fraudulent IDs, passports, bank account numbers, credit cards, loan applications, criminal records, or credit reports. 

A simple way to think about it is that identity theft is the stealing of the data, and identity fraud is the act of using that information. 

Common types of identity fraud

Cybercriminals can be involved in various types of identity fraud, such as:

• Synthetic identity fraud. It involves thieves creating a “Frankenstein” ID using a combination of real and fake information. Scammers steal some information from victims and falsify the rest, for example, using an actual Social Security number with a fake name. Such fraud is often seen in cases with deceased people or children. 
• Tax identity theft. Tax identity fraud can be hard to detect, but it's important to know that tax authorities typically won’t contact you by phone, text, or email. Instead, watch for physical mail from the relevant tax agency in your country, such as the IRS in the United States.
• Child identity theft. This crime happens when a thief opens a credit account using a child's information (typically children younger than 16). It might go undetected until the child grows up and starts to apply for jobs, credit cards, or a student loan.  
• Social Security identity theft. This crime happens when a criminal takes your Social Security number and uses it to perform various types of fraud. The scammer may use it to open a new bank account or credit card or attempt to use it to be employed using your name. 
• Employment identity theft. This crime happens when a thief steals your information and uses it to apply for a job using your name. can hurt your credit score and make it harder to find a new job when you start looking. It may also result in tax or legal issues. 

How does identity fraud occur?

Identity fraud happens when a thief successfully steals an individual's personal information. To achieve this, they may attempt to hack accounts or even dig through trash to obtain bank or credit card statements. 

Criminals use various methods to successfully perform identity fraud, including digital theft, physical theft, social engineering, and data breaches. Once thieves have this information, they typically create fraudulent transactions, open accounts, or perform other types of theft. 

Common uses of stolen identities

At the end of the day, criminals use stolen identities for all sorts of bad reasons. Once criminals have access to personal information, they can commit different types of fraud:

• Financial fraud. This crime includes opening credit cards, taking out loans, or withdrawing funds from bank accounts.
• Medical identity theft. A thief may use someone else’s identity to receive medical treatment or file insurance claims, which can alter medical records and pose health risks.
• Criminal identity theft. A criminal might use someone else’s identity when arrested, potentially creating a fake criminal record.

How to protect yourself from identity fraud

The most important thing to remember is that protecting yourself from identity theft is crucial as that’s the stepping stone to identity fraud. You should safeguard any sensitive or personal information with different security tools. 

Follow these steps to protect yourself from identity fraud: 

• Create strong passwords for all accounts.
• Don’t reuse passwords.
• Install anti-phishing software like Threat Protection Pro™ to help detect suspicious websites.
• Request copies of your credit report.
• Use a VPN when you’re connecting to public Wi-Fi. 

What to do if you’ve become a victim of identity fraud

Most countries have a specific fraud department or government entity that assists individuals and helps them to report identity theft. 

If you believe you’re a victim of identity fraud and live in or are from the United States of America, you should report it using the Federal Trade Commission's (FTC) Report Fraud online tool. In the UK, you can report fraud to Action Fraud. Countries all around the world have individual agencies where you can submit an identity theft report. 

Then, you can place a fraud alert on your credit reports, contact credit bureaus, freeze your credit cards or bank accounts, block new accounts from being opened, and update your passwords for relevant financial accounts.