Your personal information is one of your most valuable assets, and you have more control over protecting it than you might think. While identity theft has become more common in our digital world, awareness and tools to prevent it have come a long way. Back in the early 2000s, few states had clear laws in place, and protective technology was limited. [1]
Today, we not only understand the risks better, we also have more resources to stay ahead. According to Identitytheft.org, nearly 1.4 million complaints were filed with the FTC last year, and cybercrime-related losses topped $10 billion. [2]
As identity theft methods become more advanced, staying proactive is key. The encouraging news? With the right habits and tools, anyone can take meaningful steps to safeguard their financial future.
Understanding the Types of Identity Theft
Identity theft can take many forms, and both the financial and emotional effects can be significant. As noted in our previous article, wealthy families are often targeted, and individuals with higher incomes or significant assets are often targeted due to their financial profile. However, identity theft goes well beyond credit card fraud; it includes a variety of methods criminals use to exploit personal information. [3]
The most common is financial identity theft, where someone uses your personal information to make purchases or open accounts. Others may impersonate you to file false tax returns, obtain medical services, or secure employment. Children and deceased individuals are also common targets for child and estate identity theft.
In more serious, though less common cases, someone may use your identity during contact with law enforcement. And in increasingly complex schemes, fraudsters may engage in synthetic identity theft, blending real and fake details to create new profiles.
Being aware of these tactics is an important first step in safeguarding your financial well-being.
Why You Should Monitor Your Credit Reports Closely
Keeping an eye on your bank and credit card accounts is a critical first step in catching potential fraud. But to strengthen your financial protection, regularly reviewing your credit reports adds another valuable layer. These reports—available weekly for free at AnnualCreditReport.com—provide a detailed look at your borrowing history, payment patterns, and account activity across all three major credit bureaus: Equifax, Experian, and TransUnion.
Your credit history includes current and past credit accounts, payment records, outstanding debt, and more. This data directly influences your credit scores, which lenders use to evaluate creditworthiness. By checking your reports regularly, you gain a clearer picture of what lenders see and can catch any inaccurate, incomplete, or suspicious entries before they cause harm or signal possible identity theft. [4]
Some warning signs to look for include unfamiliar accounts, incorrect personal information, inaccurate late payments, or hard credit inquiries you didn’t authorize. These could point to fraud or reporting mistakes. If you spot anything unusual, it’s important to act quickly—reach out to the lender or file a dispute with the credit bureau. [5]
Just as account alerts help flag unauthorized charges, monitoring your credit reports can help you catch fraud early, before it affects your credit profile or long-term financial confidence.
Should You Pay for Identity Theft Protection Services?
Even the most vigilant individual can’t monitor every account around the clock, so it’s possible to miss signs of identity theft without some extra support.
Identity theft protection services add that additional layer by offering ongoing credit monitoring, real-time alerts for suspicious activity, and expert assistance if your identity is ever compromised. Many plans also include features like dark web surveillance, Social Security number trace alerts, privacy scans, and insurance to help cover identity theft recovery costs. [6]
A key benefit of these services is automation. By continuously scanning your credit reports, financial accounts, and even underground sites where stolen data may appear, they can detect issues you might otherwise overlook. If fraud does occur, many offer professional guidance and identity theft insurance, sometimes up to $1 million, to help manage legal fees and recovery expenses.
That said, these services can be costly and may overlap with services you already have. Some credit card issuers and banks offer basic monitoring and alerts at no charge. It's worth comparing service options carefully—not all plans monitor all three major credit bureaus, for instance.
If you’re exploring options, several providers stand out. According to NerdWallet.com, Aura is a strong choice for families, combining credit monitoring with antivirus and VPN tools. LifeLock Ultimate Plus includes investment account alerts. IDShield offers social media monitoring, IdentityForce focuses on real-time fraud alerts, and ID Watchdog is known for assisting with existing identity theft recovery. [7]
Whether you choose a service or prefer a DIY approach, strong passwords, multi-factor authentication, and secure internet connections remain your first and best line of defense. But even the best precautions can be tested—so it’s wise to have a recovery plan in place just in case.
What to Do If You Suspect Identity Theft
Identity theft isn’t always obvious right away. Clues may include unfamiliar charges, loan denials without clear reason, accounts you didn’t open, or missing mail. You might also receive calls from debt collectors about debts you don’t recognize, or see unknown accounts appear on your credit report. If something seems off, it’s important to act quickly.
Start by contacting the fraud departments of any companies where suspicious activity has occurred. Close or freeze the affected accounts, and immediately update all related passwords, PINs, and login credentials.
Next, place a fraud alert with one of the three credit bureaus: Experian, Equifax, or TransUnion. This free service prompts creditors to take extra steps to verify your identity before opening any new credit in your name.
For even stronger protection, consider freezing your credit with each bureau. A credit freeze restricts access to your credit reports, making it more difficult for identity thieves to open new accounts in your name. It doesn’t impact your current accounts or credit score and can be lifted or reinstated at any time. A freeze is especially helpful after a data breach, suspected fraud, or as a proactive precaution.
Be sure to report the identity theft to the Federal Trade Commission at IdentityTheft.gov. In some cases, especially if the activity appears to be local, filing a police report may also be appropriate. Keep detailed records of all steps you take. IdentityTheft.gov offers tools to guide you through the process, including checklists, sample forms, and personalized recovery plans. [8]
When to Seek Professional Help
If you’ve taken the right steps but still feel overwhelmed—or if you're managing the aftermath of identity theft—it may be time to bring in professional support. Financial advisors can help you implement broader protection strategies that extend beyond identity theft, ensuring your accounts are secured as part of a comprehensive financial plan. In more complex cases, such as stolen Social Security numbers or fraudulent legal activity, identity recovery specialists or attorneys can help you navigate the process, recover stolen funds, and restore your records.
Turning to experts can reduce stress, save valuable time, and strengthen your defenses going forward. If identity protection hasn’t been a focus yet, now is an excellent time to move it higher on your list.
Take a moment to assess the precautions you currently have in place and address any gaps. Staying informed and proactive remains one of the most effective ways to safeguard your financial future.
Sources:
1. https://www.govinfo.gov/content/pkg/GAOREPORTS-GAO-02-424T/html/GAOREPORTS-GAO-02-424T.htm
3. https://www.equifax.com/personal/education/identity-theft/articles/-/learn/types-of-identity-theft/
5. https://www.transunion.com/article/what-to-look-for-in-your-credit-report
6. https://www.experian.com/blogs/ask-experian/what-are-the-benefits-of-identity-theft-protection/
7. https://www.nerdwallet.com/article/finance/comparing-identity-theft-protection-services
8. https://www.identitytheft.gov/Steps
Russell D. Rivera, CFA, CFP®, is the Founder and President of Voice Wealth Management, an independent financial services firm serving professionals, entrepreneurs, and families in New York City and beyond. Focusing on helping clients make informed decisions about saving, investing, and financial planning, Russell is committed to providing a customized approach that reflects each client’s unique priorities and experiences.
This material has been prepared in collaboration with Crystal Marketing Solutions, LLC, and has been edited with the assistance of artificial intelligence tools. The information presented is based on sources believed to be reliable and accurate at the time of publication. This material is for educational purposes only and does not necessarily reflect the views of the author, presenter, or affiliated organizations. It should not be construed as investment, tax, legal, or other professional advice. Always consult a qualified professional regarding your specific situation before making any decisions.