How to Recover from the Scourge of Identity Theft

Imagine this unpleasant but increasingly common scenario.

You take your financial responsibilities seriously. You pay your bills on time, every time—even those student loan payments that feel like the proverbial albatross around your neck. You pay cash for most things and make it a point to live within your means. You feel like you’re in charge of your financial life, and you’re making progress toward your goals.

One day, you try to write a check to buy some groceries, and the cashier informs you the store can’t accept it. Or perhaps, you’re in a position to buy a home, and you apply for a mortgage. You apply for a conventional loan, an FHA loan, and perhaps even a lenient-qualification VA loan, but mortgage lender after lender turns you down, citing your poor credit score. How can that be, you wonder? So you download a copy of your credit report and what you see has no relationship to the financial reality you thought you were living in. There are credit cards you don’t recognize listed on your report. They not only have ridiculously high balances, but they’re also in arrears. By now, you’re a little bit panicked, so you start combing through your bank statements. There are debits from merchants you’ve never patronized. Something is seriously amiss. You realize then that thing you’ve heard more and more about—identity theft—has happened to you. 

How Common Is Identity Theft?

Identity theft isn’t a new phenomenon. As early as the 1960s, thieves primarily used the telephone to perpetrate the crime. The scam went something like this. Victims were told that they were eligible to receive a gift or even an inheritance, but they had to provide sensitive bank information to process the payment. It was the mid-century modern version of “phishing”—an electronic ploy that still leads to massive financial loss today. According to the Federal Trade Commission, the identity theft threat is growing: there was a 113 percent increase in incidents between 2019 and 2020. Identity fraud cost consumers a whopping $43 billion in 2020. The most frequent targets are consumers between the ages of 30 and 39. That may be due to a combination of factors: having a critical mass of financial accounts in their names, having accumulated assets large enough to be attractive to cybercriminals, and the frequency with which they do business online.

Limiting Your Risk

Cybercriminals are like mice. They’re able to squeeze into the tiniest of spaces in service of feeding themselves. But most of us unwittingly leave the door wide open for them. From the electronic devices we use so casually to the passive trust we put in financial institutions, cybercriminals are experts at exploiting tech trends and consumer behavior.

If you want to seal up the cracks in your identity safety, here are some essential tips cybersecurity professionals often recommend:

• Practice good password hygiene. That means choosing random, hard-to-remember passwords, not reusing passwords on multiple accounts, and changing your passwords frequently. If that sounds like a tall task, a password manager might be for you. There are several reliable password managers available for free.
  
• Be on the lookout for phishing scams. Often cybercriminals will lure you into providing your sensitive information by pretending to be a trusted financial partner. An email may arrive bearing your bank’s logo that warns your account may have been compromised and urging you to call to confirm a transaction. The criminal may then ask you to identify yourself with your social security number or password. Don’t do it. Call the number on the back of your debit card or your local branch office to establish the legitimacy of the email.
  
• Collect your mail every day if you have an outdoor mailbox or, better yet, install an indoor mail slot.
  
• Don’t put undue trust in financial technology. Review every line item on your bank and credit statements to be sure you recognize every transaction. Report discrepancies immediately to the statement issuer.
  
• Shred your paper financial statements, credit card offers, and receipts after you’ve had a chance to review them. The same goes for expired debit and credit cards. Dumpster diving is one tactic cybercriminals commonly use to gain access to your sensitive information.
  
• Protect your electronic devices by activating available firewalls and installing virus protection software.
  
• Avoid using public WiFi networks. Consider installing a VPN for those times when you need to access the internet outside your secure home or office.
  
• Check your credit report regularly. Often, the first signs that your identity has been stolen appear there. Once again, there are free credit monitoring services you can sign up for that will alert you when there are changes in your credit profile. They’ll let you know if your credit score goes up or down or a new account is opened in your name. The downside of free services is that they make money by marketing financial offers to you. But if you don’t mind wading through a bunch of sales pitches, the information these services gather on your behalf can be extremely valuable.

Professional Identity Theft Protection Services

If protecting yourself from identity theft sounds like a full-time job, you may want to consider outsourcing it. The best identity theft protection services alert you when your personal data has been compromised in a data breach. They monitor changes to your credit report. They also scan the dark web for your personal information—those places on the internet that aren’t indexed by search engines and are only accessible with special browsers and electronic configurations.

Some identity theft protection companies reimburse subscribers for any financial losses they suffer if they’re victimized. Some even cover the legal expenses associated with restoring one’s identity. Most identity theft protection companies offer multiple ways to customize the services you pay for and a mobile app you can use to access your account conveniently. Basic individual plans are available for under $100 a year. Family plans and more comprehensive services may run up to $300 annually. But even a single incident of credit card fraud can cost well more than that.

Professional identity theft protection is like car insurance. You may not like paying for it, but you’re grateful you have it when you have to make a claim. But whether you farm out the job to a subcontractor or do it yourself, it’s important to take the threat of identity theft seriously. Nowadays, it’s a critical part of living a financially responsible life.