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Identity theft is not just an unauthorized charge on a credit card anymore.

Identity theft, according to the Federal Trade Commission, “occurs when someone uses your personally identifying information, like your name, Social Security number or credit card number, without your permission, to commit fraud or other crimes.”

How your information is stolen, and how it is used, varies greatly. With stolen Social Security numbers, thieves are filing false medical claims, applying for mortgages and opening lines of credit for fictitious businesses. By adding fake fronts onto A.T.M.’s or gas pumps, they are collecting credit card numbers and PINs.

But while the trade commission estimates that nine million Americans are victims of some sort of identity theft each year, these extreme cases of identity fraud remain rare, luckily.

You may find that you will need only to close a compromised account or freeze your credit if errors appear. But recovering from the effects of an extreme case of identity theft can be incredibly messy and time-consuming. You could be denied a mortgage, for example, or refused new lines of credit. It can take months or even years to repair your credit history, and this type of crime is hard to prosecute.

While financial institutions, health care companies and other organizations have taken steps to improve security measures in recent years, do not rely on them to protect you. Taking some common-sense steps now can help prevent major headaches later.

PREVENTION

Your first step should be to review monthly statements from your checking and other financial accounts. The earlier you catch an error, the easier it is to resolve it. Yes, balancing your checkbook may seem a monotonous chore, but understanding where your money goes will help you spot any irregular withdrawals or charges. Reviewing your credit card bill each month is critical as well, especially if you charge a lot of your daily purchases. If you have not already, this may be a great time to sign up for online accounts. It’s easier and faster to review accounts online, on a computer you trust.

Next, order and review your credit reports. The three credit agencies, TransUnion, Equifax and Experian, are each required by law to provide you one free credit report a year. AnnualCreditReport.com has links to all three, and it is the only place to get them free. (Other sites may try to charge you or get you to sign up for monthly services of some sort.) Stagger your requests, and you can monitor your credit history every four months. While you are at it, make sure your name, address and other information are correct. If you find old or inaccurate information, have it removed.

While companies like your health care provider are no longer printing Social Security numbers on member identification cards, a lot of personal information is still out there. Be sure to shred old bank statements, applications for new credit cards and other documents that have personal information.

Secure your personal information online and offline. Do not carry your Social Security card in your wallet. Keep it at home with your other important documents. Be careful about online passwords as well and change them often. And be vigilant about sharing personal information when opening new accounts online. If online advertisements or offers seem too good to be true, they probably are.

ACTION

The steps you will need to take to recover from identity theft depend on the type of fraud you believe has occurred. If you are going through your monthly statements and see an error on an existing credit card, monthly bill or financial account, first call the company to report it.

By federal law, credit card companies have strong consumer protections in place, and they have large departments to investigate fraud. For that reason, you may want to consider using a credit card to pay for online and major purchases. That will give you more protection than if you use a debit card, because the money comes directly out of your bank account when you use a debit card. Making purchases with a credit card provides a layer of protection.

Once you have reported the error and determined there is reason to believe a fraud has occurred, the Federal Trade Commission recommends that you place an initial fraud alert with one of the three major credit reporting agencies. (They are required by law to report the fraud alert to the other two agencies.) The alert, which remains on your credit report for 90 days, automatically entitles you to a free copy of your report. Review this for any accounts you did not open or activity you did not conduct, and confirm that the report has your correct name, address and Social Security number.

Once you have determined that a fraud has occurred, you should also file both a complaint form with the trade commission and an identity theft report with your local police department. And you should file these complaints if you see any new accounts on your credit reports that you did not personally open.

After you have filed the reports, make multiple copies of them and save the originals in a safe place. While identity theft is hard to prosecute, these documents will help you investigate your case with the credit agencies and the financial institutions you do business with. Filing with the trade commission may also provide you with certain protections. In addition, law enforcement may use your information in their identity theft investigations.

Depending on the severity of your situation, you may want to consider the second type of fraud alert. The initial alert, which is recommended if, say, you lose your wallet, requires potential creditors to take certain steps to verify your identity before opening new accounts in your name. The extended fraud alert, which lasts seven years, requires creditors to contact you personally before new accounts are opened.

But there is one thing to remember: Fraud alerts help only when a thief is trying to open a new line of credit. They may not prevent a thief from using existing accounts or ordering new cards. Nor can they prevent the opening of a bank account or another account that does not require a credit check.

While they are different in each state, credit freezes are also available. When you place a freeze on your credit report, businesses and creditors cannot check your credit history unless you temporarily lift the freeze. The cost of freezing your credit, the cost of thawing it temporarily and the rules on who can freeze their credit depend on the state.

Regardless of the severity of the problem, be careful when you contact the companies of the compromised accounts or the accounts you think have been tampered with. While the level of risk varies because of credit limit, credit history and other factors, your credit score may be negatively affected if you choose to cancel credit card accounts. Inform the creditor that you have reason to suspect you are victim of fraud, and ask it for the company’s policy in situations like these. One option is to ask that the account be assigned a new number. Another option, when contacting credit agencies, is to place a 100-word consumer statement on your credit report explaining the fraud. This statement will stay on your credit report as long as you want.

And again, be sure to get documentation on all of your conversations and interactions with these lenders.

EXTRA HELP

In recent years, the three main credit agencies — and other companies as well — began offering credit monitoring and identity fraud services for monthly or annual subscriptions. Some companies even offer identity theft insurance. Prices and services vary, but overall, the agencies promise to monitor your credit report and send alerts if any questionable activity is found.

Whether it is a wise idea to sign up for such services depends on your wallet and your need for peace of mind. If you have already been a victim of identity theft and have had to spend a significant amount of time and resources to clean up your record, the services may reassure you. But if you have not had any problems and you are already vigilant about reviewing your accounts, it may not be worth the money.

New York Times. Elisabeth Goodridge. Published: May 1, 2009