What is identity theft?

If someone steals your identity, you may not realize it has happened. But the effects can be serious. Identity theft occurs when your personal information, such as your name, account number or Social Security number (SSN) are used without your knowledge to commit fraud or theft. Armed with your personal information, thieves can make unauthorized purchases on your credit cards, apply for new credit cards and loans, cash bad checks, lease cars or mislead authorities, doing serious damage to your credit history.

Although you probably won't be held liable for fraudulent charges, clearing your name and credit history can be a time consuming, frustrating and lengthy process. In the most serious cases, it could take months or even years to complete, and during that time you might find it hard to get a loan, rent an apartment or even be hired for a job. As with many crimes, the impact can be emotional as well as financial.

There are two methods of identity theft:

1. The most common type of identity theft is someone using your stolen credit cards, debit cards, checks or account information to make purchases or withdraw money from your accounts. You're likely to detect this type of theft when charges you haven't authorized show up on your credit card bill or when your bank or securities accounts are depleted.

2. Less frequently, but even more dangerous, someone might open new accounts in your name using your address, a stolen SSN or other forms of personal identification, and make purchases or obtain credit in your name. And if they use a different mailing address, you might not even learn the fraudulent accounts exist until you're turned down for credit or check your credit report.