Identity fraud vs identity theft

Identity fraud vs identity theft fingerprint image.

By Tom Kennedy, CFP®:

It’s frightening to think that on the dark web, a child’s social security number is worth more than an adult’s number, because it is a clean slate without any history. Parents do not regularly think about protecting that number, because it’s usually locked away tight until the child turns of age. But losing an identity to theft can create a mountain of issues and heartache as victims are thrown into reactive mode.

People often confuse identity fraud with identity theft. While both identity fraud and theft involve using some aspect of one’s identity for malicious purposes, the outcomes are different.

Identity fraud

This type of crime takes place when stolen information like a credit or bank card is used to commit a crime. There are several ways criminals can get your credit card details:

  • Lists of credit card numbers and details may be purchased on the dark web
  • Sometimes someone you did business with may steal or sell your card details
  • A credit or bank card may be skimmed through a device that captures your card details and the PIN you entered

Banks try to be proactive about controlling identity fraud because it costs them money. When a credit card is used fraudulently, most banks will refund the customer what was stolen, and then seek to prosecute the criminal – that is if they can locate them. To combat their associated losses, some banks troll the dark web, searching for your bank card numbers. This is why you may sometimes be issued a new card without requesting one. It is often because the bank discovered your card details on the dark web.

Identity theft

This type of crime takes place when a criminal steals your financial identity, and takes over that identity to commit a wide range of crimes. This usually involves accessing an individual’s social security number, date of birth, address, and name. When criminals have access to your personal identifying information, they can pretty much do whatever they want, including:

  • Falsify applications for loans or credit
  • Transfer or withdraw money from your bank accounts or other financial institutions
  • File tax returns and steal your refund
  • Gain access to more private information with fraudulent online accounts

There are several ways criminals can get your personal identifying information:

  • Dumpster diving – they may dig through the trash to gain access to discarded financial documents
  • They may hack into the computers of healthcare and medical facilities because they are a treasure trove of personal information
  • Criminals can hack into businesses that store this type of data such as financial institutions
  • They may capture the data sent over the internet
  • Criminals can purchase the information through the dark web
  • Sometimes parents may use the child’s identity to commit fraud

Unfortunately, data privacy in the US is wide open. What’s worse is that we are guilty of putting too much information out there in the public realm. If you pay for an online background check on yourself, you might be alarmed to see how much information is available about you to anyone who simply pays the fee. These companies have scraped the internet and social media for things like:

  • Where you have lived
  • How much you paid for your last house
  • Who lives next to you
  • Who lived in the house before you
  • How much you make
  • What education you have
  • Whether you have a criminal history
  • And more

This information enables criminals to find answers about your identity, and coupled with the personal information that many of us share on social media, it is not difficult to see how a criminal can piece together your financial life.

How do I keep my identity secure?

While there is no magic bullet that will keep your personal information safe, being proactive with your own security is an important step in protecting yourself. Here are some best practices you should adopt to avoid becoming a victim:

Never send your personal data through email. Do not send a social security number, credit card details, username or password through email because it is not secure.

Does a company really need your social security number? When engaging with a company, ask yourself if they really need to store social security numbers? Using the last 4-digit identifier is common, but the entire number should never be shared over phone or by email.

Opt-Out of offers. Stop receiving credit card and insurance solicitations in the mail by calling the consumer credit reporting industry opt-out number (888) 567-8688.

Watch how social you are with information. Social media is a critical piece in the identity theft equation. Control what personal information you share publicly and review your privacy settings on all the social media and email platforms you use. While you may be able to lock down your information, some of your data may be accessible by your connections, their contacts and the public.

What if you’ve already shared too much information? If your whole life is out there, you have to be that much more careful about selecting security questions and passwords. Answer security questions using false information but remember to keep track of those false answers because they may be difficult to remember.

Pay attention to passwords. Ensure that your passwords and security questions do not use information that is publicly available, such as your mother’s maiden name, where your father was born, or even your first job.

Regularly monitor credit. Stay vigilant and be near real-time when monitoring your credit and financial information. Do not wait until the end of month to check your bank statement, by then it may be too late.

Protect the children. It is a good idea to protect children’s data by placing a lock on the three main credit bureaus. Sadly, an estimated 20-40% of children with credit issues is a result of a parent that used their social security number for loans during a divorce situation. Without paying the loans back, once a kid turns 18, their credit is already damaged.

Lock your information down. Use credit freezes or credit locks. While a credit freeze and lock are very similar, a lock is harder to undo. After the Equifax breach, it’s worth checking into whether there is a free service available for you to use. You could get an ID theft solution like LifeLock, or perhaps search AARP, or your credit card issuer for solutions. It is best to find a solution with an app that will notify you real-time if your social security number is being used.

What should you do if you are a victim of identity theft?

  • Contact the police to file a report
  • Contact all three major credit repositories to place a fraud alert on your credit report
  • Contact the companies where you know fraud has occurred. You will want to keep detailed records of who you talk to and when
  • Consider adding a credit freeze or credit lock to the three main credit bureaus. It is imperative that you freeze or lock your credit so no further damage can be done.

While identity fraud and theft can be a hassle, there are some proactive steps you can take to keep your personal information safe and lower your chances of becoming a victim. Your trusted financial advisor can help answer your questions about protecting your data.


Tom Kennedy is a financial advisor located at Global Wealth Advisors 520 Post Oak., Suite 450, Houston, TX 77027. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial network®, Member FINRA  / SIPC, a Registered Investment Adviser. Financial planning services offered through Global Wealth Advisors are separate and unrelated to Commonwealth. He can be reached at (832) 649-8111 or at

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