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Finance glossary

What is identity theft? Identity theft vs identity fraud

Bristol James
5 Min

Identity theft and identity fraud are forms of cybercrime involving the unauthorized use of someone else’s personal information for fraud. Identity theft occurs when a perpetrator steals an individual’s personal details, while identity fraud refers to the misuse of that stolen information to impersonate someone else and engage in other fraudulent activities.

Identity theft and identity fraud can have devastating consequences for victims, ranging from financial losses and damaged credit to reputational harm and emotional distress. In this article, we delve into the intricacies of these crimes, exploring their common methods, impacts, and preventive measures.

Understanding identity theft and identity fraud

Identity theft is the illegal acquisition and use of someone else’s personal information, typically for financial gain. Perpetrators get sensitive data such as social security numbers, credit card details, or passwords through various means, including phishing scams, data breaches, and physical theft of documents. Once they get someone’s information, they use it to open fraudulent accounts, make unauthorized purchases, or commit other crimes in the victim’s name.

Identity fraud, often used as a synonym for identity theft, refers to the specific misuse of stolen personal information to impersonate someone else or gain unauthorized access to financial resources. This can involve applying for loans or credit cards, accessing bank accounts, filing fraudulent tax returns, or even obtaining medical services—all using the victim’s identity.

These two terms are closely related: identity theft serves as the initial act of obtaining personal information, while identity fraud involves the subsequent fraudulent use of that information. In essence, identity theft precedes identity fraud, providing perpetrators with the means to carry out various forms of financial and non-financial deception.

How does identity theft happen?

Identity theft and fraud can occur through various methods, exploiting vulnerabilities in both physical and digital environments. Here are some of the most common ways these crimes can happen:

  1. Shoulder surfing. Criminals may observe you in public places when you’re handling sensitive information, such as when you’re entering credit card numbers or PINs. This tactic, known as shoulder surfing, allows perpetrators to steal your information without your knowledge.
  2. Fake websites. Criminals create fake websites that mimic legitimate ones, tricking users into entering their personal information. These fraudulent sites often appear convincing, making it difficult for individuals to discern their illegitimacy, resulting in data theft and identity fraud.
  3. Phishing emails. Many individuals fall victim to phishing scams, where fraudulent emails masquerade as legitimate entities and request personal information. Responding to these emails can unwittingly provide criminals with access to sensitive data, which they can then exploit for nefarious purposes.
  4. Spam emails. Similar to phishing, spam emails often promise enticing benefits but request personal information in return. Unsuspecting recipients may provide their data, unaware that they’re handing it over to criminals who have no intention of fulfilling their promises.
  5. Data breaches. Criminals may exploit weaknesses in computer systems or networks to steal large amounts of personal data en masse. These data breaches can occur in various contexts, including financial institutions, retailers, or government agencies, exposing individuals to identity theft on a massive scale.

Understanding these common methods of identity theft is crucial for individuals to safeguard their personal information and mitigate the risk of falling victim to these crimes. By remaining vigilant and implementing security measures, individuals can better protect themselves from the devastating consequences of identity-related offenses.

Examples and consequences of identity fraud

Once they gather enough identifying information about a person, criminals can take over the victim’s identity to conduct a wide range of crimes. Here are some common examples of identity fraud and their consequences:

  1. False applications for loans and credit cards. Armed with stolen personal details, criminals may apply for loans or credit cards in the victim’s name. These fraudulent applications can result in financial loss for the victim and damage to their credit score.
  2. Fraudulent withdrawals from bank accounts. Identity thieves may gain access to a victim’s bank account information and make unauthorized withdrawals or transfers. This can deplete the victim’s funds and disrupt their financial stability.
  3. Obtaining goods or privileges denied under the criminal’s real name. Identity fraudsters may use stolen identities to obtain goods, services, or privileges that they would be denied under their own name. This could include renting property, accessing healthcare services, or applying for government benefits.
  4. Tax fraud. Identity thieves may use stolen personal information to file fraudulent tax returns and claim refunds in the victim’s name. This can lead to delays in legitimate tax refunds for the victim and potential legal consequences.
  5. Medical identity theft. Criminals may use stolen identities to obtain medical services, prescription drugs, or submit fraudulent insurance claims. This type of identity fraud can compromise the victim’s medical records and lead to incorrect diagnoses or treatments.
  6. Employment fraud. Identity thieves may use stolen identities to secure employment illegally. This can result in financial liabilities for the victim, as well as damage to their reputation and employment prospects.

These are only a few examples of identity fraud. Still, they clearly show the pervasive nature of identity fraud and highlight the importance of safeguarding personal information to prevent falling victim to these crimes. Vigilance, awareness, and proactive measures can help individuals protect themselves against identity fraud.

What are the early signs of identity theft and identity fraud?

Recognizing the initial signs of identity theft and fraud is crucial for prompt action. Some early signs to watch for include unfamiliar transactions on your credit or debit card statements, receiving new credit or debit cards that you didn’t request, spotting incorrect items or accounts on your credit report, receiving unexpected medical bills for services you didn’t receive, and getting notices for debts or purchases you didn’t make.

Being vigilant and promptly addressing these signs can help mitigate the impact of identity theft.

How to prevent identity theft and identity fraud

Preventing identity theft and fraud requires proactive steps to safeguard personal information and minimize unauthorized access. Here are essential tips:

  • Protect your personal information, like social security numbers and passwords.
  • Secure your devices using strong passwords and keep software updated for online security.
  • Be cautious online and avoid suspicious links and downloads, as they may be phishing attempts.
  • Monitor your financial accounts regularly, including bank statements and credit reports, to check for unauthorized activity.
  • Dispose of sensitive papers by shredding them before discarding them.
  • Be skeptical of unsolicited communications and avoid sharing personal or financial details in response to them.
  • Retrieve mail promptly and consider using a locked mailbox or post office box.
  • Stay informed and educate yourself about common identity theft tactics and scams to recognize and avoid them.

By following these measures, individuals can reduce their risk of identity theft and fraud. Consider additional protection services or insurance for added security.


  • Identity theft and identity fraud involve the unauthorized use of personal information for fraudulent activities.
  • Identity theft occurs when personal details are stolen, while identity fraud involves the misuse of that information for deceptive purposes.
  • Common methods include phishing, shoulder surfing, and fake websites.
  • Examples of identity fraud include false credit applications and fraudulent bank withdrawals.
  • Early signs include unfamiliar transactions and incorrect items on credit reports.
  • Preventive measures include safeguarding personal information, monitoring financial accounts, and staying informed about common scams.





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