Identity theft and identity fraud - what you need to know

Here’s what you need to know about identity theft and identity fraud

A woman using two-step authentication with her phone and laptop
(Image credit: Getty images)

Identity theft and identity fraud are growing problems, with the number of cases going up by more than 20% in the past year according to Experian.  

The latest scams use increasingly sophisticated tricks to deceive us, and even the mobile phone apps you download can be a security risk. It’s never been more important to stay vigilant and protect yourself against scams, identity theft and fraud. 

The amount of money we’re losing to identity fraud is shooting up.  According to UK Finance fraudsters are now stealing £21.45 million compared with £11.5 million last year.

Identity theft and identity fraud

What is Identity theft?

Identity theft is when someone steals your personal information.  

It can be anything from rifling through your bin to find your name, address and date of birth from old paperwork you haven’t shredded to stealing financial data including passwords for your online accounts.    

Identity theft then typically leads to identity fraud, when your stolen details nare used to open new accounts in your name as well as taking out credit and racking up debts that could be traced back to you.

How does identity theft happen?

There are various ways this can happen and with more of us living a large part of our lives online we can easily play into a scammer’s hands.  

You can be tricked into revealing personal details if you fall victim to scams including phishing emails.  

This can happen if you inadvertently click on a link in a fake email claiming you need to reset the password on your PayPal or online bank account.  

In other cases, fake emails may warn you’ll be cut off if you don’t make instant payments for services like broadband or pay fake fines.

There has also been a big increase in the number of fake emails claiming to be from Ofgem about energy rebates and other Government agencies about payments owed due to the cost of living support package.  

Responding to these may mean you’re lured into giving away personal details – which once again fraudsters can use to steal your identity.

How can identity theft become identity fraud?

James Jones, Head of Consumer Affairs at Experian credit reference agency said: “Identity fraud is when someone steals your details, which we call identity theft, and then uses them for their financial gain”.

In other words, identity theft and identity fraud are closely linked. Stealing your details is theft and using them to open credit cards or rack up debts in your name is fraud.

In some cases, identity fraud may only come to light if you spot a suspicious payment on your account or get a bill or invoice for something you don’t recognise and know nothing about.

If you are a victim of identity fraud it can have an emotional and financial impact.  

At the very least you may find it hard - if not impossible - to take out any loans, cards or a mortgage in your name until the matter is resolved.

Identity fraud can also impact your credit score.  This can happen when a fraudster takes out a credit card or loan in your name using your stolen details and defaults on payments or racks up debts.  

This in turn can affect your chances of getting the best deals in future on everything from 0% deals on credit cards to personal loans, mobile deals and mortgages.

If you think you have been the victim of identity fraud – contact your bank or card company immediately. 

 You can also contact the UK’s Fraud Prevention Service CIFAS who can carry out extra security checks if you, or anyone else, apply for credit at your address. Its protective registration service costs £25 for two years.

Why it pays to check your credit record

It's worth getting in the habit of checking the information on your credit record is correct and up to date.  

This acts as your financial CV as it’s the snapshot of your financial habits that prospective lenders see before deciding whether to offer you credit - like a credit card or mobile deal.

Ideally, you should check your credit record at least once a year –  and across the three main credit reference agencies – Experian, Equifax and TransUnion.

“Once you have your reports you can easily spot any new credit applications or credit accounts you did not initiate”, says James Jones.

“You can then either contact the relevant lenders directly yourself or ask the credit reference agencies to raise disputes on your behalf, which should result in the accounts being closed and your credit report updated. The agencies can also help you shore up your identity, for example, by adding security features to your credit reports”.

How to stay protected

Set up different passwords for online accounts.  A whopping 59% of us use the same password across all our online accounts according to LastPass.  Using the same one makes it easy for fraudsters to unlock all your accounts in one go if they get their hands on just one password.  

Nationwide recommend using a password that is at least twelve characters long and avoiding anything personal including your pets’ names.  The more complex your password – the harder it is for a fraudster to crack – so ideally a combination of letters, numbers and even symbols.

To keep your online details safe – you should also install online security software on all your devices and keep it updated.  

Which? recommends setting up two-factor authentication (2FA) when you add a second step to your log-in process where possible - particularly with social accounts, banks and online retailers. 

It means rather than just typing in your password, you have to complete a second step, too. It could be typing in a code sent to you by text or generated by an app on your phone or it confirming it's you with a fingerprint or a scan of your face.

It means your stolen details alone are less likely to be able to give scammers access to your accounts. 

Be careful when using public wifi too.  It may be fine for browsing – but avoid using it for online shopping or banking where you need to give your personal and financial details.

Ideally, shred anything with your name and address on it – including old bank and credit card statements and at the very least score through your address on parcels before dumping empty boxes by your recycling bin.

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Sue Hayward

Sue Hayward is a personal finance and consumer journalist, broadcaster and author who regularly chats on TV and Radio on ways to get more power for your pound.  Sue’s written for a wide range of publications including the Guardian, i Paper, Good Housekeeping, Lovemoney and My Weekly. Cats, cheese and travel are Sue’s passions away from her desk!