After purchasing a new Armani wardrobe, some Tiffany jewellery for his 'ho' and a quarter-of-a-tonne of fertilizer for a home-made bomb, the criminal thought it was time to call Citibank and complain about their Identity theft protection service (which costs $9.99 a month).


In this case, John Hargrave, the blogger behind the Credit Card Prank on zug.com, was simply demonstrating how easy it was to steal someone's identity and how little credit card companies did to prevent identity theft. But often, identity theft is not so funny.

According to the U.S. Department of Justice, in one extreme case of identity theft the criminal obtained a home loan, incurred $100,000 worth of credit card debt, purchased handguns in his victim's name and regularly called his victim to taunt them. The victim spent $15,000 and four years trying to clear their name and restore their reputation.

Identity theft is the number two reported crime in the U.S. and according to Baycorp, costs Australia more than $2 billion a year.

But what is identity theft, how is it committed and what can you do to protect yourself?

We're all familiar with the '100 point' identification check used in Australia for obtaining a passport, drivers licence or bank account. The process requires a combination of several forms of personal identification.

Identity thieves use a combination of techniques, including social engineering, obtaining public information available on the Internet, 'shoulder surfing' (watching you enter your PIN or listening as you provide your credit card number over the phone) and 'dumpster diving' (rifling through your disposed garbage looking for bank statements, pre-approved credit card applications or any other document which may divulge your personal information) to build a composite portfolio of your identity.

They'll collect information such as your name, address, previous addresses, telephone numbers, employers, date of birth, tax file number and even the information typically used for password verification, such as your mother's maiden name.

Often, this is enough data to obtain a copy of a low-level form of identification. For example, with your name and date of birth, the thief may call your utility company and ask to change your postal address to an anonymous P.O. Box and then request a copy of the most recent bill. That simple document is worth 25 points.

They might contact your high school or university and, providing your name, date of birth and alumni information (usually available on the education institution's website) request a copy of your academic records. A further 25 points.

These documents, coupled with additional utility bills (home phone, mobile, internet, gas, water etc, each worth 25 points) and a forged statutory declaration from a previous employer would be enough to obtain a copy of your birth certificate. 70 points. Game over.

Once the thief has a copy of your birth certificate they can obtain a passport, drivers licence, open bank accounts, change your electoral role information and take control of your existing bank accounts and credit cards.

Of course, there are other 'low-tech' ways to hijack your identity. Carelessly disposed credit card pre-approvals can be activated by a dumpster-diver and used. An overheard credit card number or pilfered wallet would allow the thief to use your card, temporarily at least, to make purchases.

Identity theft can have huge financial repercussions beyond the incurred debt. Once the thief uses your credit card and neglects to pay the bill, the resulting default notice is recorded on your credit file, which can make it difficult to obtain a home loan.

So how can you prevent it?

• Carefully dispose of your personal documents, even those which seem innocuous such as bank statements. They can provide a piece of the puzzle for an identity thief.
• Be mindful of providing your credit card details to a website you don't know, particularly where the web address doesn't begin with 'https'.
• Be aware of 'shoulder surfers' and ensure no-one can see you enter your PIN number of overhear your credit card details.
• Monitor your credit file
• Store your cards and personal ID in a secure place

What should you do if you've been the victim of identity theft?

• Call a major credit reporting service (Veda, Dun & Bradstreet etc) and have a fraud notification placed on your file. This will mean any new applicants using your name will need to prove their identity more vigorously.
• If new accounts have been opened in your name, contact the creditors and notify them immediately.
• Contact your local police and inform them of the fraud.
• Change all of your passwords - every e-mail account, bank account, utility company: everything. And not just the online passwords - change your phone passwords and secret phrases too.

What next?

• Compare all credit cards
• Read other articles
• Read credit card reviews