1 in 3 Americans Are Now Dealing With Identity Theft, So Here Are the Steps I'm Taking ASAP to Protect Myself

Identity theft is increasingly common and impacts millions of Americans. It's horrible to think that someone might be lurking on the internet or rifling through your trash to find data they can use to impersonate you. But sadly, criminals can use even scraps of personal information to open accounts or get credit in your name.

If you've been the victim of identity theft, you'll know the fallout can be both stressful and financially damaging. Americans lost $8.8 billion to fraud and identity theft last year, per the FTC's Consumer Sentinel Network Data Book for 2022. The median loss was $650, but sadly, the damage goes beyond the cost. Identity theft can impact your credit score, medical care, and even your home. Moreover, it can take hours (sometimes hundreds of hours) to resolve.

What is identity theft?

Identity theft is essentially any situation where someone uses your personal information without your consent -- usually for financial gain. That might involve running up false charges on your bank account or creating completely new accounts in your name. It might be someone filing a fake tax return so they can claim your refund. Criminals could even use your identity to get medical services or apply for a job.

According to one 2018 Proofpoint study, 33% of Americans have had their identities stolen at some point. The FTC data shows that credit card and bank fraud -- particularly the opening of fraudulent new accounts -- were the most common types of identity theft in 2022. Both had increased significantly year on year. Most top credit cards will refund fraudulent transactions, but that protection doesn't apply to identity theft.

How to protect yourself against identity theft

Having recently lost my passport, I've been hypervigilant about protecting my financial data recently. Spotting identity theft quickly can really help minimize the damage. Online security company Aura says, "How soon you discover a case of identity theft can be the difference between a $200 and a $10,000+ loss." Here are some of the steps you can take.

1. Check your credit reports and bank activity regularly

You can get a free weekly copy of your credit report from all three credit bureaus from AnnualCreditReport.com until the end of 2023. Weekly reports are probably a bit excessive unless you have reason to worry about identity theft. But it's worth checking regularly to see if there's anything you don't recognize -- like someone opening an account in your name.

My online bank also messages me whenever there's activity on any of my accounts. It makes it easier to track my spending, and means I'll see any usual activity straight away. Everybody is different. If you find that level of messaging annoying, you might prefer to check your bank account transactions every week or so. Some checking accounts also let you set up alerts for certain types of movements, such as large withdrawals or unusual activity.

2. Consider a credit freeze

One of the best ways to protect yourself against identity theft is to freeze your credit. It basically limits who can access your file to do a credit check. Without a credit check, it's hard for someone to open an account or borrow money in your name.

To freeze your credit, you need to contact each credit bureau individually:

• Equifax
• Experian
• TransUnion

You can unfreeze your account or lift the freeze temporarily whenever you want. So a credit freeze won't stop you from taking out a mortgage or personal loan. Importantly, it makes it a lot harder for anyone to impersonate you.

3. Be on the alert for phishing attempts

Phishing is when criminals pose as legitimate companies and try to trick you into giving out your personal data. It might involve a phone call or an email that looks like it comes from your bank saying there's an urgent issue with your account. Those messages are designed to panic you, but try not to let them get under your skin.

If you receive an odd email, look at who sent it. The email address may not be quite right -- or it may come from a Gmail account instead of the actual company. The message will often demand immediate action in some form or other. Other telltale signs? Watch out for poor grammar or odd wording, strange attachments (don't open them), or a greeting that sounds slightly off. For example, I recently got an email from "Coinbase Team !" with no salutation at all.

4. Use different passwords for every account

It's much harder to hack into your accounts if each has its own password. Ideally, each one will have a mix of upper- and lowercase letters, symbols, and numbers. It can be irritating to do, but it really does minimize your risk. A password manager can help you keep on top of all those unique passwords.

I used to use the same three passwords for everything. When the company I ordered vegetables from online got hacked, it meant criminals had my email and password for a bunch of other accounts, too.

5. Don't use public wifi for online banking

There are a few ways you can protect your data when you're out and about. One is to be careful when using public wifi and avoid logging into any confidential accounts. Another is to limit what you carry with you. For example, you'll rarely need to have your Social Security card and all your credit cards in your wallet at the same time.

Bottom line

In an increasingly online and connected world, it's almost impossible to make yourself invulnerable to identity theft. That said, the harder you make it for criminals, the more likely they are to leave you alone and look for easier targets elsewhere.