Identity Theft: What it is and What You Need to Know

Jenius Bank Team1/26/2023 • Updated 1/8/2025

Frustrated man on a phone call holding his head.

Identity theft is a real headache. Learn the signs to protect yourself. Change your passwords. Use secure apps and internet connections. Don’t share your personal information on untrustworthy sites. Watch for scammers. After years of hearing these tips, you may start tuning them out. Unfortunately, this inattention may make you a target for crafty identity thieves.Thieves could steal your identity with access to just a few pieces of information, and it may take years to recover from the damage done. According to the Federal Trade Commission, there were over 280,000 reports of identity theft in 2024, and that was a report from only October of that year!¹But what is identity theft? And how could it affect you?

Key Takeaways

Identity theft happens when thieves access and use your personal information without permission.
Thieves may use your information to open new accounts, make purchases, or even commit other crimes.
Protecting your personal information with complex passwords, using secure internet connections, and diligently watching for scams may help you avoid long-term complications from identity theft.

What Is Identity Theft?

The United States Department of Justice defines identity theft and fraud as crimes committed by unlawfully obtaining and using another person’s information. These crimes usually involve fraud or deception and are done to make money.² In non-lawyer speak, identity theft happens when someone steals your information and exploits it, typically to make money. Identity theft takes many forms, and could include things like someone taking your financial information, your medical information, or even stealing your tax refund. While all forms of identity theft could result in thieves making money, we’re focusing on financial identity theft.

Types of Financial Identity Theft

Not sure what constitutes financial identity theft? It happens anytime a thief uses your personal information in a way that could impact your finances. Here are a few common situations you should know about:³

Credit Card Fraud: Credit card fraud may occur in two ways. First, a thief may use your personal information to open new accounts in your name. Second, someone could access current credit card information and make purchases without your knowledge.
Account Takeovers: Depending on the information a thief has, they may be able to access your bank account. From there, they could make unauthorized purchases, write fraudulent checks, or potentially transfer your money to themselves. In a worst-case scenario, they could alter login and verification details, locking you out of your account entirely.
Tax Identity Theft: If identity thieves gain access to your personal information, they may be able to file a tax return and receive your refund. This may cause delays or errors when you try to file your taxes. If you suspect that you’re a victim of tax identity theft, contact the IRS to help you investigate the situation.

To protect yourself from these scenarios, keep an eye on your credit report for any unfamiliar accounts associated with your Social Security number and report unauthorized accounts to the credit bureaus immediately. It’s also important to review bank and credit card statements for any purchases you didn’t make. If you notice suspicious activity, contact the institution immediately.

How Do Thieves Get My Information?

Identity thieves are crafty and have many ways of obtaining your financial information, ranging from complex scams to modern forms of pickpocketing. Some common methods used today include:

Dumpster Diving: Fraudsters may search trash and recycling bins for new account offers or financial statements.
Skimming: Some thieves use a skimmer, which is an electronic device that steals information from a card’s magnetic strip, on an ATM or fuel pump to get account numbers.
Online Vulnerabilities: Thieves may gain account information via unsecured public Wi-Fi or websites.
Dark Web: Some thieves purchase account information on the dark web from others who found it via hacking or data breaches. The dark web is a hidden part of the internet that requires special software to access. Using the dark web alone isn’t illegal, but engaging in criminal activities, like sharing stolen personal data, may occur.
Phishing and Smishing: Many thieves trick people into giving over their information voluntarily by sending them emails (phishing) or text messages (smishing), impersonating companies you may already have an account with. The message may look official with a logo or use an email address that’s only off by a letter from the genuine business email address.

Be diligent. Fraudsters have mastered the ability to create emails and text messages that are nearly identical to ones sent from official channels. You could always contact your bank, credit union, credit card company, or other organization to verify that any email or text message you receive is real. Speak to one of their customer service reps or contact them through their official website rather than responding to suspicious emails or texts directly.

What Do Thieves Do with My Information?

Identity thieves could fraudulently use your information in several ways. This includes opening accounts in your name, making purchases, or potentially engaging in other criminal activities. Some of the most common instances include:

Opening New Accounts. Fraudsters may use stolen information to open new credit lines or bank accounts in your name. Oftentimes, they change the billing address, so you don’t receive statements and are unaware of the fraudulent account. Since the accounts are in your name, you could be on the hook to pay off the debts.
Making Unauthorized Purchases. If a thief gets your credit card or bank account numbers, they may spend money ranging from small items that blend in with your regular spending habits to large, multi-thousand-dollar purchases. If they gain access to your debit card, they may also withdraw cash from your checking accounts.
Criminal Behavior. A thief may be able to use your information for illegal matters, such as purchasing illegal items or submitting false applications for loans and credit cards.

Identity theft may cause a range of problems for you. This could range from a poor credit score to placing you on the hook for debt you didn’t take on and, potentially, even criminal charges. In addition to protecting your information, make sure to keep an eye on your accounts for any unusual activity.

Early Warning Signs of Identity Theft

If your information has been stolen, there are ways to catch thieves and potentially prevent excessive financial impact. Many companies, especially financial companies, send you an alert if the information on your account has changed or if suspicious activity has occurred. In addition to these alerts, it’s a good idea to check your accounts manually for charges you don’t recognize and your credit report for accounts you didn’t open. You can get access to a free copy of your credit report from AnnualCreditReport.com.Some things to keep your eye out for include:

Unexpected changes to personal information on an account
Unexplained withdrawals or charges on your statements
New accounts on your credit report
Errors on your credit report
Collection notices for unknown debts
Denial of loan or credit card applications
Missing statements
Errors on your tax return

You could save yourself a lot of heartache by watching for small changes to your information.

How to Protect Your Identity

One of the best ways to prevent identity theft is to find ways to keep your personal information safe. Here are a few easy tips that may help you protect yourself for years to come:

Use different passwords for each site that stores your credit card information, bank account details, and any other sensitive data.
Shred old bills, bank account statements, and investment statements as soon as you no longer need them.
Monitor your credit report regularly and report any errors on your report when you find them.
Use virtual credit cards through payment apps like Samsung Pay^®, Apple Pay^®, and PayPal^® to help keep your numbers secure. These apps generate temporary one-time-use card numbers that you could use to make purchases through the app, keeping your info safer.
Use multi-factor or two-factor authentication when logging in to your bank account and other financial accounts.
Sign up for transaction notifications with your bank or credit card issuer so you can monitor activity in real time.
Set transaction limits on certain accounts. These limits require you to approve transactions over a specific dollar amount, reducing the risk of fraud and identity theft.

Though it’s impossible to prevent identity theft completely, these steps could help make it harder for a thief to get to or use your information.

Recovering From Identity Theft

As the victim of identity theft, the cleanup and repair to your finances and credit may take some time. You may find the free step-by-step identity recovery plan on the Federal Trade Commission’s website helpful.

Final Thoughts

Identity thieves are constantly coming up with new ways to get your information, but you could help protect yourself by watching your accounts and following up on any suspicious activity. It’s a cliché, but when it comes to your identity, an ounce of protection really is better than a pound of cure. Identity theft isn’t the only type of scam you may encounter. Watch for these common IRS scams throughout the year to help you keep your identity even more secure.

Financial WellnessFraud & Security

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