How To Protect Against Identity Theft

What is Identity Theft?

Identity theft is a crime -- specifically, it's a fraud. The criminal uses another person's personal information to either create a fake identity or use the victim's identity in fraudulent ways. Most of the time, the goal of the thief is financial. He may use the victim's Social Security number to apply for a credit card, then spend freely and never have to worry about the bills, because they're linked to the victim. Sometimes, stolen information is used to create fake paperwork for illegal immigrants, allowing them to live and work somewhere even if they are not allowed to do so legally.

The simplest form of ID theft is the theft of a credit card or check book. The thief then uses the card or writes checks on your account to make purchases, hoping the clerk doesn't carefully check the signature or ask to see photo ID. This is the oldest form of ID theft, and it requires a thief to physically steal an item from you.

Other thieves use information to make fraudulent credit card purchases without actually stealing your card. The waiter at a restaurant might jot down your credit card number and your name. Later, he looks up your address, then goes online and makes several purchases on your account. Or the thief might use your information to sign up for cell phone service.

The most nefarious identity thieves can infiltrate the victim's financial life completely. The thief obtains a fake birth certificate, uses the victim's Social Security number to open new credit accounts in the victim's name and even obtains loans and mortgages with the stolen identity. The thief might even use the victim's identity if she is arrested, causing an innocent person to gather a lengthy criminal record.

Up next: the basics of protecting your identity.