financial identity theft hazardsWhile your social security number is a key that opens many doors, some of the first doors identity thieves try to access with it are those leading to your credit and bank accounts. Though these types of fraud, typically blanketed under the term financial identity theft, are extremely common, that doesn’t mean that they aren’t worth covering. In this post, we’ll be discussing financial identity theft and the type of fraud usually associated with it. Continue reading to learn how you can identify it and remain safe.

What exactly constitutes financial identity theft?

When we use the term “financial identity theft,” we are referring to the credit account abuse that typically comes with having your social security number stolen. This includes the opening of a multitude of fraudulent accounts, including new loans, credit cards and lines of credit, in your name. Since thieves rarely care to pay any debt they rack up, this can lead to your credit limits being maxed out, tarnishing your credit scores. This type of identity theft is often coupled with the hijacking of a victim’s existing accounts, which is another type of financial fraud often associated with “vanilla” or regular identity theft. In most people’s minds, this behavior is simply seen as “identity theft,” as it’s often advertised as the poster child for identity fraud. That’s probably also because it’s an older form of identity theft which was common even before the days when everything was online. However, now that there are so many ways to obtain personal information and abuse it, we can distinguish these distinct but related behaviors to narrow down the best ways to protect ourselves.

Although the term financial identity theft sounds very broad, when we conceived of the term we called it such because credit account fraud interferes with one’s ability to receive financing from lenders. In a previous post we’ve referred to this as a distinct type of identity theft, banking identity theft; however, as we’ve discussed the identity theft 101 series, different types of identity theft don’t exist in isolation. Someone who is a victim of one type of financial identity theft should consider themselves especially at risk for other types, which is why for the sake of this post, we’re placing them all under the same umbrella.

How can you spot this kind of identity theft?

Financial identity theft, and by extension banking identity theft are relatively easy to spot because the damage is usually visible on your credit reports, as well as on your credit card, loan and banking statements. There are rare instances, though, where this fraud is perpetuated through harder to trace methods, like synthetic identity fraud, but even these methods have some telltale signs. Additionally, it’s important to note that financial and banking fraud have very limited scopes of impact. While damage to your credit score and finances is absolutely nothing to scoff at, compared to the jeopardy that employment identity theft and medical identity theft can have on your livelihood (attacking your means of making money and your health, respectively), both banking and financial identity theft are more manageable. Furthermore, the banking and investment industries have decades of experience dealing with fraud, and thus have mechanisms in place to make it easier for consumers to stop abuse when institutions don’t catch it before they do. Don’t believe us? Keep reading to find out how to prevent and deal with this type of fraud.

What can you do to prevent financial identity theft?

There’s a lot that consumers can do to make it less likely that they become a victim of financial identity theft. Though we’ve discussed these tips before, they’re worth covering again:

  • Have good online financial cybersecurity. Since most consumers manage their finances online, fraudsters and hackers spend a great deal of effort either compromising their victims’ systems or the sites that they visit. Make sure that you’ve bookmarked the addresses of your financial institutions, or that you’re at least familiar with their proper URL names. Avoid clicking on links in emails or unfamiliar web pages to navigate to financial websites. You’ll also want to make sure that you understand what HTTPS is and that you’re aware of the certificates that your financial institutions use on their sites so that you aren’t susceptible to spoofing scams. For additional security, you can take advantage of other features that your financial institutions offer, like two-factor authentication or account alerts. You might also find practicing other, more general cybersecurity habits to be helpful, too.
  • Have good offline financial security. Even though many of us manage our finances primarily online, there are still offline considerations that you should make. Keep in mind that any financial statements you leave around the house can be used against you, either by strangers or someone you know. With that in mind, you’ll probably want to check your mail often and invest in a cross-shredder, if you haven’t already gone (or don’t want to go) paperless.
  • Be careful of where you use or share your credit card/SSN/bank account numbers. Both on and offline, we can be asked to provide our credit cards or social security numbers. You should err on the side of never providing this information over the phone unless you’ve established a way to verify who you’re talking with. The same advice goes for your bank account numbers, which are equally valuable to scammers. Be careful who you give checks to, and when possible, use more secure forms of payment with fraud protection (like your credit card). Finally, when shopping in person, beware of devices like skimmers, and whenever shopping online (or any other activity that requires input of personal information), make sure the page has HTTPS encryption and that you’ve verified the website’s certificate.
  • Check your financial reports and statements often. The best way of making sure your accounts or credit haven’t been compromised is to view all three of your credit reports, as well as your banking and financial account statements, as often as possible to check for inconsistencies or errors. You can view your credit reports for free once every 12 months through AnnualCreditReport.com, and if you’d like to see updated versions more frequently, consider investing in a credit monitoring service.
  • Protect your credit by placing a fraud alert or freeze. While a fraud alert might sound like something you shouldn’t do unless you’ve been a victim of identity theft, these alerts can serve a purpose for people who are being proactive in protecting their accounts, since they partially or completely block new credit accounts from being opened in your name. A credit freeze is the more severe version, and some security experts have been advising all consumers to set them up, regardless of whether their data has been compromised or not. While they don’t completely prevent identity theft, they can certainly help.
  • Keep up on breach news. Knowing what companies and merchants have been breached is a good way to ensure you can protect yourself, as it gives you a clue of what passwords might need changing or when to be especially critical when reviewing your financial statements. You can follow the news on your own to see if any of the merchants or institutions you’ve used have been hacked, or bookmark our data breach blog to check for the latest stories. Additionally, some identity theft protection services such as LifeLock Ultimate Plus send data breach alerts to subscribers to keep them in the know.

What should you do if you become a victim?

Becoming a victim of identity theft in any measure is scary, but you have options if the worst should occur. Because there are a multitude of ways you can fall victim to financial identity theft, there’s no single recommend response; however, the following actions will be ones that you should consider taking:

  • File a complaint. Whenever you’re the victim of financial identity theft, you should file a police report as well as submit an identity theft report to the FTC or IC3. This will help establish a paper trail, which you may need when the credit bureaus and creditors are evaluating your claims. You can also reach out to non-profits that specialize in helping identity theft victims, like the Identity Theft Resource Center, for further assistance in the reporting and recovery process.
  • Lock access to your credit. Whether new credit accounts were opened in your name or existing accounts were abused, you will definitely want to consider either creating fraud alerts or even credit freezes on your credit reports with the three bureaus. As we noted earlier, this is something you can do as a proactive measure, as well as a response to becoming a victim of financial identity theft (or any other kind of identity theft). Note that fraud alerts need to be renewed every 90 days (which you can do by contacting just one of the bureaus), while credit freezes are a long-term option that will need to be temporarily lifted if you decide to apply for new credit in the future.
  • Consider closing or locking down compromised accounts. If you have any accounts that were used by scammers (e.g., credit cards, savings accounts, lines of credit), you should consider closing the accounts to prevent them from being abused again. This can feel like a last resort, and it’s not always going to be necessary, but it can help – especially if you experience repeated abuse of an account. Likewise, if fraudulent accounts have been opened in your name, you will want to contact the creditors that issued them to resolve the situation and get the accounts shut down.
  • Continue to be on the lookout for other types of identity theft. After experiencing financial identity theft, you’ll want to monitor all your financial accounts for further abuse, as well as watch for other types of identity theft. To some extent, identity theft protection services can help with this by providing you with regularly updated credit reports and scores, alerts to changes detected in your credit reports and public records, as well as monitoring of the Internet black market for signs that your personal information is being traded, sold or used by bad actors.

Protecting your identity isn’t easy, but knowledge is the first step. To learn more about various kinds of identity theft and how to combat them, continue reading our identity theft 101 series.

Disclaimer: This content is not provided or commissioned by the companies referenced in this article. Opinions expressed here are the author’s alone and have not been reviewed, approved or otherwise endorsed by the companies mentioned. NextAdvisor.com may be compensated through advertiser affiliate programs.