To Catch a Thief: Prevent Identity Theft from Happening to You

By Peter D’Arruda

In the past five years, over thirty-three million people have had their identity stolen.  People need to realize that their most valuable possession is not their house, car or antique jewelry collection. Your most valuable possession is your identity. What would happen if someone stole it?

While many people believe that identity theft is nothing more than someone stealing your credit cards and racking up charges, the fact is that identity theft has many forms and can do much more damage than simply ruin your credit. As an identity theft victim, you could end up in serious trouble with the IRS or even in jail.

The Five Types of Identity Theft

1. DMV Records Identity Theft: An identity thief obtains a driver’s license in your name and accumulates traffic tickets.  In some states, the thief can even vote in your name.  Approximately 15 to 16 million illegal aliens are in the United States, and most of these people have a driver’s license - a fake one.  This also happens when someone may not be allowed to have a driver’s license anymore due to DUI charges, but he or she still decides to drive - using a fake and stolen license.

If the thief gets lots of traffic violations in your name (even DUI charges) and fails to pay those fines or appear in court, you who may get arrested.  Once the police take your fingerprints and compare your image to the picture on the driver’s license they have on file, they’ll realize it’s not you, but by that time you may have already gone through much embarrassment and aggravation.

To protect yourself, pull your DMV record at least once a year to make sure you don’t have any tickets on there that aren’t yours. Also check if any duplicate licenses have been made for you that you haven’t requested. DMV identity theft is the number one form of identity theft today. 

2. Social Security Number Identity Theft: With this variation of identity theft, a thief uses your social security number for work purposes. The thief gets a job and puts your social security number as theirs on their payroll forms. Why? Either they don’t have a real social security number, possibly because they’re in the country illegally, or they have government tax liens or child support liens on their own social security number and don’t want to pay what they’re obligated to pay. Further, the thief requests that the employer withhold the minimum taxes allowed by law, or they make arrangements to be on a 1099 status and have no taxes withheld at all.

When you file your taxes on time, you receive a letter from the IRS stating that you failed to pay taxes on the income you earned while employed at ABC Company. But you never worked at ABC Company; the identity thief did. The IRS demands that you re-file your taxes and pay the required taxes, plus penalties, on the income you didn’t declare.

Fortunately, you can easily prove that you never worked at ABC Company, but dealing with the IRS can take a long time and requires a lot of paperwork. Many people end up consulting with an attorney because this is not something they want to handle on their own.

3. Medical Information Bureau Identity Theft: In order to prevent insurance fraud, anytime you go to the doctor or fill a prescription, it gets noted in your Medical Information Bureau (MIB) file. This prevents people who are terminally ill from purchasing millions of dollars of life insurance.

In terms of identity theft, a thief uses your personal information to obtain a prescription or medical care, thus putting the claim on your file. These thieves are getting controlled substances and major medical procedures that would make them uninsurable if they used their own MIB file. Depending on the prescriptions, they may even be making you look like a drug addict to the medical and insurance communities.

To prevent this from happening to you, go to www.mib.com or call toll-free 866-692-6901 and get a free copy of your MIB report. If anything looks suspicious, contact the MIB immediately.

4. Character and Criminal Identity Theft: This form of identity theft is an off-shoot of the DMV file theft. In this scenario, a thief uses your identity to avoid fines or jail time. For example, someone who already has a long police record gets arrested for felony robbery. When the police pat him down, they find your identification. The thief is arrested, has mug shots taken, and is fingerprinted—all in your name. You, the law-abiding citizen, now have a criminal record. Later, when you apply for a job or for credit, you learn that you did not get the job or the loan because you have felony charges against you. The only way to know if someone is posing as you to the police is to check your criminal record. 

5. Financial Identity Theft: This is the most publicized form of identity theft, and is the easiest to fix. With financial identity theft, someone steals your credit card numbers and uses them for purchases, leaving you with the bill. Once you discover fraudulent charges on your accounts, most credit card companies give you 60 days to file a claim, and most times the credit card company will refund the money to you. However, if someone steals your debit card, you usually only have two days to report the fraudulent activity. Debit card theft is more costly than credit card theft, because with a debit card, someone can drain your account while you rack up bounced check charges.

To protect yourself, review your credit card and bank statements regularly. Also, sign up for online banking with your financial institution so you can monitor your bank account activity and be able to act on any questionable items quickly.

Free Credit Reports: By now you’ve likely seen the online pop-up ads for “free credit reports.” Most of these offers require that you purchase or subscribe to something in order to get your free report. To really access your credit for free, you can visit the government sponsored site www.annualcreditreport.com or call 877-322-8228.

Since you are entitled to one free credit report per year from each of the three credit reporting agencies, request one report from one agency every four months rather than requesting all three at the same time. This enables you to regularly monitor your credit. All three agencies share information with each other, so you’ll have a good idea of what’s going on with your credit using this strategy.

Be Proactive, Not Reactive:  Identity theft is one of the fasting growing crimes in America. Don’t let yourself be the next victim. By knowing the various forms of identity theft, you can take proactive steps to protect yourself and your family, thus ensuring your peace of mind.

Peter D’Arruda, author of Financial Safari, has been teaching investors how to preserve their assets, increase their income and reduce income taxes for more than 15 years.  He holds certifications as a Certified Identity Theft Risk Management Specialist, Senior Advisor, Estate Advisor, Charitable Advisor, Annuity Consultant, as well as an Identity Theft Risk Management Specialist.  Peter is well-known across the country as both an educator and financial expert.  For more information, please contact him at 919-657-4201 or at pete@financialsafari.com.