According to the U.S. Department of Justice, identity theft and identity fraud are terms used to refer to all types of crime in which someone wrongfully obtains and uses another person's personal data in some way that involves fraud or deception, typically for economic gain. When someone gains access to your Social Security number, bank account numbers, and credit card accounts, they can use that information to steal from your accounts, open lines of credit in your name, or even completely assume your identity.
How They Do it
Identity thieves do not need to break into your house to get the vital information they need to steal your identity. Some of their 
tactics are simple and sneaky and others are quite sophisticated. The Justice Department identifies the following common methods used by thieves:
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Shoulder surfing. In a public place, a thief may look over your shoulder to see your ATM PIN or watch you type in a credit card number or they may simply listen as you give a credit card number over the phone. Be very careful about where you are when you input these sensitive numbers and codes.
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Stealing mail. When you receive a pre-approved credit card offer in the mail, you may toss it straight into your recycling bin. However, a thief can steal that out of your garbage and try to activate the account. Always shred this kind of mail before recycling it.
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Email spam. If you receive an email asking you to reply with private information, never do it. A legitimate business will never solicit personal information from you. These emails are coming from thieves who will use the information to open a credit card in your name or to access your bank accounts.
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Hacking into online records. This tactic requires a great deal of computer skill, but is becoming more and more common. Whether your personal accounts are hacked, or a major retailer, creditor, or bank is compromised, once a thief has your information, he can steal much more than money from you.
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Skimming. In this method, a thief attaches an electronic data collection device to an ATM or point of sale outlet to capture your information when you slide your card. You will not see the device and will not know the information has been stolen.
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Direct theft. While thieves in the past may have stolen your wallet for the cash, or perhaps to use a credit card until it was reported stolen, they will now use the cards in your wallet to steal your identity. They can open new credit cards and access your accounts with the information found in your wallet or purse. Never carry your Social Security card on your person.
With some of these methods, there is simply no way to protect yourself. That is why it is important to check your credit report often so that you will know as soon as something suspicious has happened. When your identity has been stolen, it is important to take action quickly.
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