How to Prevent Different Types of Identity Theft?

Identity theft is a serious concern all across the globe. It’s a crime of obtaining personal details of another person to commit fraud. There are numerous identity theft types, ranging from synthetic identity theft to social security identity theft to financial identity theft. Each theft can harm you in different ways, but you can prevent them by using simple tips and tricks. Let’s find out what these tips are.

Gabija Stankevičiūtė

Identity theft is a significant problem worldwide. Every year, in the United States, 10% of the population is a victim of identity theft. On top of that, out of the 5.7 million cases reported to the FTC, 1.4 million cases, which make up 25% of the total, were related to identity theft.

Identity theft is when someone steals your personal information and uses it without your consent. There are numerous types of identity theft, each affecting you differently. Let’s briefly get to know some common identity thefts and how to prevent them.

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Types of Identity Theft

Identity can be categorized into several main types. Here are some examples:

Child Identity Theft

Child identity theft happens when someone uses the Social Security number (SSN) of a child to commit fraud. Fraud can include applying for government benefits, opening credit accounts, or taking out loans unlawfully.

Criminals can obtain children’s personal information through data breaches targeting organizations that store such data, such as schools, healthcare providers, or government agencies. These breaches can expose children’s names, birthdates, Social Security numbers, and other sensitive details.

In some cases, child identity theft can be perpetrated by a family member or someone close to the child who has access to their personal information. This could be a parent, guardian, relative, or family friend with malicious intentions.

Fraud against children

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Cybercriminals can steal a child’s information from accounts at a kid’s favorite store or school databases. Therefore, parents must keep their child’s details private, including the Social Security number. According to the Javelin Strategy & Research study, child identity fraud hit around 1 million U.S. victims in 2017.


Synthetic Identity Theft

This type of theft includes creating a fake identity by combining real and fabricated data. It is used to take out loans or sign up for credit cards. As per the Federal Trade Commission, it is one of the fastest-growing fraud types in the United States and accounts for 20% of all fraud losses. Statistics from Equifax show that it costs the U.S. around $8 billion per year.

This type of fraud can be challenging to detect because it doesn’t rely solely on stealing one person’s identity; instead, it involves the construction of entirely new identities.

Here’s an example of how synthetic identity fraud works:

The fraudster begins by inventing a synthetic identity, often using a real Social Security number (SSN) as the foundation. They combine this SSN with a fabricated name, birthdate, and address to create a seemingly legitimate identity. To build a credit history for the synthetic identity, the fraudster applies for a secured credit card or a small loan using the fabricated identity. They may use a small initial deposit to secure the credit card or loan.

Over time, the criminal diligently pays the credit card bills or loan installments on time, gradually improving the synthetic identity’s credit score. This makes it appear more legitimate to lenders and credit bureaus. Once the fraudster has acquired substantial credit lines, they may max out the credit cards or take out large loans without any intention of repaying them. After obtaining these funds, they disappear, leaving behind a trail of unpaid debt.

Synthetic Identity Theft

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Medical Identity Theft

It might cause severe problems for the victim. Medical identity theft is a type of identity theft where someone fraudulently uses another person’s personal information, such as their name, insurance information, or Social Security number, to obtain medical services, prescription medications, or healthcare benefits.

It occurs when someone steals the victim’s personal information and utilizes it to gain medical services, drugs, or treatments in their name. Sometimes, bogus medical bills come to victims. If false bills that come to victims go unpaid, it might cause a big problem.

Detecting medical identity theft can be challenging, as victims may not realize it has occurred until they receive unexpected bills, encounter issues with their health insurance, or notice discrepancies in their medical records.

To prevent and address medical identity theft, you should:

  • Safeguard your personal and insurance information.
  • Regularly review your Explanation of Benefits (EOB) statements and medical bills.
  • Check your credit reports for any medical-related collections or accounts.
  • Report suspected medical identity theft to the healthcare provider, insurance company, and law enforcement.

Medical Identity Theft

Financial Identity Theft

This theft is a criminal offense that involves gaining access to someone’s personal information for financial fraud. One typical example of financial identity theft is fraudsters stealing credit card details to make purchases without a credit card holder’s consent. With more than 271,000 cases, credit card fraud was the most prevalent form of theft in 2019.

Here are several examples of financial identity theft:

  • Account Takeover: The thief gains access to a victim’s existing bank, brokerage, or financial accounts by stealing login credentials or phishing. They then make unauthorized withdrawals or transfers, potentially draining the victim’s funds.
  • Credit Card Fraud: An identity thief obtains another person’s credit card information through physical theft or online hacking and uses it to make unauthorized purchases. They may also clone the card to make in-person transactions.

  • Online Payment Fraud: Using stolen account information, the thief may access the victim’s online payment accounts (e.g., PayPal, Venmo) to make unauthorized transactions or transfer funds to their own accounts.

  • Investment Scams: In some cases, thieves use stolen identity information to engage in investment scams or Ponzi schemes, targeting the victim’s financial assets.

Financial Identity Theft

Social Security Identity Theft

Social security identity theft is another common identity theft type. When a thief steals your Social Security number (SSN) and utilizes it to obtain other personal details about you, it is called social security identity theft.

Once a fraudster knows your name, address, phone number, and date of birth, they might use your identity to commit various types of crimes. Identity hackers can use your SSN to apply for new credit cards, open new bank accounts, register for home and car loans, and rob your tax return. They might even demand Social Security payments that you have received.

Equifax Inc., the U.S. credit bureau, suffered a hack that exposed the personal information, including SSNs. of 145 million individuals.

How to Prevent Identity Theft?

Now, you have a good understanding of different types of identity theft. Let’s learn some tips and tricks to protect yourself from these frauds.
How to Prevent Identity Thefts

Comply with Know Your Customer (KYC)

If you run a business where you have to contact several people in a day, you must adhere to KYC (Know Your Customer). Complying with KYC not only helps you avoid legal and reputational issues but also prevents fraudsters from using your platform for malicious purposes. An effective KYC process involves knowing a customer’s identity, financial activities, and the risks they pose.

Detecting and preventing identity theft through KYC procedures can save businesses from financial losses associated with fraudulently opened accounts, unauthorized transactions, and legal expenses. What’s more is that customers appreciate businesses that take security seriously and protect their personal information. Complying with KYC regulations can enhance a company’s reputation and build trust among its customer base.

Remember, businesses need to meet Customer Due Diligence (CDD) and KYC as per the law. Failure to meet these liabilities might impose hefty fines and even imprisonment.

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Be Aware of Fraudulent Activity

Never take the confidentiality of your personal information for granted. If you notice something unusual, report it immediately to the responsible organization before it causes any harm to you. Nowadays, companies provide robust identity verification features, including AML screening, face verification, and digital identity verification services, to reduce fraud risks.

Avoid Giving Out Personal Information

Fraudsters disguised as credit card company employees or customer care executives can ask for your personal information like SSN, credit card PIN, etc. Remember, no legitimate firms ask for such personal details. If you doubt a call is potentially fair, ask the caller to hang up and contact the organization for confirmation.

The Future of Your Personal Data – Privacy vs Monetization

Limit Your Exposure

There is a saying, “Prevention is better than cure.” It’s always a good idea to limit your exposure. You can limit the number of credit cards you carry in your wallet. Also, don’t carry a social security card until it’s essential.

In addition, limiting your exposure online by sharing minimal personal information and avoiding oversharing on social media reduces the amount of data available to potential identity thieves, making it more difficult for them to create fraudulent identities or engage in targeted attacks. That means minimizing your online presence helps protect your privacy, decreasing the likelihood of cybercriminals exploiting your personal information for malicious purposes.

Employ a Robust Identity Verification Solution

You must implement verification solutions to deal with different identity fraud types if you’re a business person. Furthermore, it will improve your customer’s experience and help you comply with directives like AML (Anti-Money Laundering) and KYC (Know Your Customer). To ensure high accuracy in identity verification, adopt the latest solution.

Ensure the identity verification system you invest in uses advanced technology like artificial intelligence, machine learning, and deep learning. When you combine such a powerful verification system with human intelligence, you get almost 100% results.

iDenfy is a renowned identity verification solution provider that offers AI-enabled ID verification solutions that let you mitigate fraud and meet regulatory compliance. We combine various verification solutions so that you can get everything you need in just one solution.

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This blog post was updated on the 19th of September, 2023, to reflect the latest insights.
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