Simply put, identity theft happens when someone assumes another person's identity in order to fraudulently obtain money, goods, or services. The results of identity theft include ruined credit ratings, unearned debt, unwanted debt collections, and sometimes even wrongful arrest.

Identity theft is a malicious and onerous crime because most victims will not find out they're a victim until the damage is already done, because it costs the victim so much, and because offenders usually get away with the crime.

Reports of identity theft continue to increase at an alarming rate each year. As many as 10 million people fall victim to this crime annually. Victims report that the experience is as traumatic as being mugged or having their home burglarized. It's an invasion of your privacy and an attack on your personal financial well-being. It undermines your sense of trust in others and creates fear of becoming a victim again in the future.

What does Identity Theft Involve?

Identity theft happens when someone gets access to your personal information. This may be your birth date, your social security or driver's license number, your bank and credit account numbers, or your PINs or passwords. Having one piece of the information puzzle makes it easier to get others. For example, knowing your birth date may give the thief enough information to trick other information out of an unsuspecting office clerk.

Once the thief has your information, they can make purchases, open new accounts, or make loans under your name. It is common for identity thieves to submit a change of address to your financial network so that you don't even receive your statements, making it more difficult for you to discover the fraud. They can run your bills to and above your credit limits. They can apply for mortgages and loans using your credit history. The can even transfer money out of your bank accounts. Unfortunately, you won't know about it until one of your valid purchases is refused by a merchant or you get a phone call or letter from a debt collector.

In the worst cases, identity thieves have committed other serious crimes under their victim's identity. Wrongful arrest and very expensive defense costs can result for the victim.

Technology is a Double-Edged Sword

One reason identity theft is on the rise is the increasing use of electronic media for making financial transactions. Shopping over the internet is common today, and many purchases are made over the telephone. Buyers and sellers don't come into contact. Signatures can't be verified long distance. Security issues abound on the internet, and it is fairly easy to get your information through non-secure websites. Hackers develop sophisticated programs that steal information as you enter it or download entire customer databases from large companies, including the customers' personal information.

Many people fail to keep their account numbers, passwords, and PINs within their control. They write them down, carry the list of numbers with them (where they can be stolen), or leave them out where others can get the information. They use passwords that are easy to guess (birth dates, anniversaries, pet's names, etc.) rather than more complex combinations of numbers, letters, and symbols. They use the same password for all their accounts or fail to change their passwords from time to time.

Advice for Potential Victims of Identity Theft

The U.S. Department of Commerce's Federal Trade Commission (FTC) has published guidelines to help citizens avoid becoming victims of identity theft:

1. Never give out more information than is necessary. Especially when shopping online or via telephone, limit your information to that necessary to make the purchase and receive the product or service. Don't volunteer anything you don't have to.

2. If you suspect someone is trying to get information from you under false pretenses (like an e-mail asking you to verify account information), contact the company in question to ask them if they sent the e-mail and why they are asking for the information. Often, the company is a victim of fraudulent activities as well. If they do not acknowledge the e-mail as theirs, forward a copy of the e-mail to the ISP that delivered it and to the FTC. You can also send an alert to the major consumer reporting companies (Equifax, TransUnion, and Experian) so that they are aware of the abuse.

3. If you can, have all of your bank and credit accounts and lines of credit password protected so that no one can make a transaction without proper authorization. Use smart passwords that are not easy to guess.

4. Keep your social security and credit cards in a safe place under lock and key. Consider putting them with other important personal documents in a safe deposit box or home safe. Avoid carrying your account numbers in your wallet or purse, and don't share the information with co-workers and acquaintances. Don't keep anything in your wallet that you can't afford to lose.

5. Don't give out your social security number unless you have to secure a credit report, open an account, or apply for a loan.

6. Don't use websites that are not secured. Make purchases and provide personal information ONLY over secure servers. Look for URLs that use "https://" and encryption software to process information they gather from customers. Find out what their privacy policies are and whether they use the information you give them for any other purposes. Base your decision on whether to proceed on their answers to those questions.