Identity theft occurs when someone exploits your personal information to impersonate or steal from you. Identity thieves may deplete your bank and investment accounts, create new credit lines, obtain utility service, steal your tax refund, utilize your insurance information to obtain medical treatment or provide police with your address and name when apprehended.

Due to the frequency of data breaches, it's prudent to take precautions to keep criminals from stealing your private information and compromising your financial position. You can start by going through this list of the best ID theft protection services, where you can thoroughly evaluate some of the leading software and then pick the one that suits your requirements most effectively.

Seven categories of identity theft

Before learning how to protect yourself from identity theft, let's learn about the different forms of identity theft.

1. Credit identity fraud

Credit identity theft occurs when a criminal applies for a new credit line using your personal information, such as your date of birth and Social Security number.

2.  Child identity theft

Criminals use a child's identity to apply for credit in their name. It is frequently not found out until the victim seeks student loans or other forms of credit.

3. False identity theft

Synthetic identity theft occurs when criminals utilize a patchwork of identification details to create an artificial consumer, often using a Social Security number not yet in the credit bureaus' database and merging it with an address and a name.

They then seek credit cards and loans, often for years, while their credit limits increase. Then there's a "bust out," when all the cards are exhausted, and the criminals vanish.

4. Taxpayers identity theft

Fraudsters sometimes exploit your Social Security number to make a tax return and take your tax refund or credit.

5. Medical identity theft

Medical identity theft occurs when you use someone else's identity to obtain health care services. It's especially problematic since it can lead to medical histories being mixed up, giving doctors and hospitals incorrect information when making healthcare decisions.

Unrecognized claims or payments on your policy explanation of benefits may indicate that unauthorized use of your health care benefits occurs.

If you've been a victim, you'll need to notify your insurance company and health care team to ensure that the information in your health care records is yours.

6. Account takeover

Criminals utilize personal information to get access to your financial accounts, then alter passwords or addresses to prevent you from accessing them.

An email, letter, or text message from your financial institution referencing an activity (such as a password or email address change) or transaction that you do not recognize.

7. Criminal identity theft

Criminal identity theft happens when a person provides law enforcement with another person's name and address during an arrest or inquiry. This is frequently accomplished through a forged identity, such as a driver's license.

Smart Ways to Avoid Identity Theft

You'll unlikely find a foolproof solution to preventing identity theft. Security solutions will only notify you after anything has gone wrong. But, there are a few steps you can take to make it far more complicated for identity fraud.

1. Use alerts

Numerous financial organizations notify account holders via email or text when transactions occur. Register so that you are notified when and where your credit and debit cards are used and when withdrawals or deposits are made to your financial accounts.

2. Keep an eye on your mailbox

One of the quickest ways to get a stolen identity is through stolen mail. If you will be out of town, have your mail held or consider installing a lockable mailbox approved by the United States Postal Service.

3. Use a digital wallet

Whether paying online or in-store, utilize a digital wallet. This app contains safe, digital editions of credit and debit cards. It may be used online and at compatible checkout terminals. Tokenization and encryption increase the security of transactions. Therefore, contactless purchases pose fewer concerns.

4. Employ secure passwords and provide a stage for authentication

Create and save complicated, one-of-a-kind passwords for your accounts using a password manager. Don't repeat passwords. Using authenticator software can help to mitigate your risk. Consider carefully what you publish on social media to avoid giving away sensitive information or hints about how you address security questions.

5. Put your credit on hold

When you freeze your credit with all three primary credit agencies — Experian, Equifax, and TransUnion — accessibility of your data is restricted, and new credit files cannot be generated.

It is free to freeze and unfreeze your credit when you want to start a new account. It gives the best security against an unauthorized user using your credentials to establish a new account.

6. Protect your Social Security number

Your Social Security number serves as the master key to your private details. Keep it as safe as you can. When asked for your phone number, inquire about why it is required and how it will be safeguarded. Securely store or discard documentation, including your Social Security number.

7. Be wary of phishing and scamming

Scammers can make phone calls that appear to be from government agencies or organizations, and emails that appear to be authentic, but they all may be attempts to steal your personal information.

Instead of replying to a phone or email, you should arrange a callback or return email from a registered or official entity. Furthermore, be cautious of attachments, as many can contain viruses.