There are two types of identity theft. "Account takeover" occurs when a thief acquires your existing credit account information and purchases products and services using either the actual credit card or simply the account number and expiration date. "Application fraud" is what some experts call "true name fraud." The thief uses your SSN and other identifying information to open new accounts in your name. Victims are not likely to learn of application fraud for some time, because the monthly account statements are mailed to an address used by the imposter.

In contrast, victims learn of account takeover when they receive their monthly account statement. This guide discusses strategies for reducing the risk of both types of fraud.

Generally, victims of credit and banking fraud are liable for no more than the first $50 of the loss. (15 USC sec. 1643) In many cases, the victim will not be required to pay any part of the loss.

Even though victims are usually not saddled with paying their imposters' bills, they are often left with a bad credit report and must spend months and even years regaining their financial health. In the meantime, they have difficulty getting credit, obtaining loans, renting apartments, and even getting hired. Victims of identity theft find little help from the authorities as they attempt to untangle the web of deception that has allowed another person to impersonate them.

Stealing wallets used to be the best way identity thieves obtained SSNs, driver's licenses, credit card numbers and other pieces of identification. While still employed, identity thieves now use more sophisticated means:

• "Dumpster diving" in trash bins for unshredded credit card and loan applications and documents containing SSNs.
• Stealing mail from unlocked mailboxes to obtain newly issued credit cards, bank and credit card statements, pre-approved credit offers, investment reports, insurance statements, benefits documents, or tax information. Unfortunately, even locked mailboxes may not stop the most determined thief.
• Accessing your credit report fraudulently, for example, by posing as an employer, loan officer, or landlord.
• Obtaining names and SSNs from personnel or customer files in the workplace.
• "Shoulder surfing" at ATM machines and phone booths in order to capture PIN numbers.
• Finding identifying information on Internet sources, via public records sites and fee-based information broker sites.

Take these steps to reduce your risk of becoming a victim of identity theft:

You cannot prevent identity theft. Criminals can commit identity theft relatively easily because of lax credit industry practices and the ease of obtaining SSNs. But you can reduce your risk of fraud by following the tips in this guide. The most important advice we can give you is to check your credit report at least once a year. If you are a victim of identity theft, you will catch it early by checking your credit report regularly.

Reducing access to your personal data:

1. To minimize the amount of information a thief can steal, do not carry extra credit cards, your Social Security card, birth certificate or passport in your wallet or purse, except when needed. At work, store your wallet in a safe place.

2. If possible, do not carry other cards in your wallet that contain the Social Security number (SSN), except on days when you need them.

3. To reduce the amount of personal information that is "out there," consider the following:

4. Install a locked mailbox at your residence to deter mail theft. Or use a post office box or a commercial mailbox service. When you are away from home for an extended time, have your mail held at the Post Office, or ask a trusted neighbor to pick it up.

5. When ordering new checks, pick them up at the bank. Don't have them mailed to your home. If you have a post office box, use that address on your checks rather than your home address so thieves will not know where you live.

6. When you pay bills, do not leave the envelopes containing your checks at your mailbox for the postal carrier to pick up, or in open boxes at the receptionist's desk in your workplace. If stolen, your checks can be altered and then cashed by the imposter. It is best to mail bills and other sensitive items at the drop boxes inside the post office rather than neighborhood drop boxes.

Credit cards and credit reports:

7. Reduce the number of credit cards you actively use to a minimum. Carry only one or two of them in your wallet. Consider canceling unused accounts. Even though you do not use them, their account numbers are recorded in your credit report, providing a tempting target for identity thieves. But be aware that reducing the number of credit card accounts might lower your credit score. Part of your score is determined by having credit cards and installment loans and making timely payments. (For more information on credit scoring, visit here.)

8. Keep a list or photocopy of all your credit cards, bank accounts, and investments -- the account numbers, expiration dates and telephone numbers of the customer service and fraud departments -- in a secure place (not your wallet or purse) so you can quickly contact these companies in case your credit cards have been stolen or accounts are being used fraudulently.

9. Never give out your SSN, credit card number or other personal information over the phone, by mail, or on the Internet unless you have a trusted business relationship with the company and you have initiated the call. Identity thieves have been known to call their victims with a fake story that goes something like this. "Today is your lucky day! You have been chosen by the Publishers Consolidated Sweepstakes to receive a free trip to the Bahamas. All we need is your Social Security number, credit card number and expiration date to verify you as the lucky winner."

10. Always take credit card receipts with you. Never toss them in a public trash container. When shopping, put receipts in your wallet rather than in the shopping bag.

11. Never permit your credit card number to be written onto your checks. It's a violation of California law (Civil Code sec. 1725) and laws in many other states, and puts you at risk for fraud.

12. Watch the mail when you expect a new or reissued credit card to arrive. Contact the issuer if the card does not arrive.

13. Order your credit report at least once a year. Federal law gives you the right to one free credit report each year from the three credit bureaus: Equifax, Experian, and TransUnion. If you are a victim of identity theft, your credit report will contain the tell-tale signs – inquiries that were not generated by you, as well as credit accounts that you did not open. The earlier you detect fraud, the easier and quicker it will be to clean up your credit files and regain your financial health.

We recommend that you stagger your requests and obtain one report each four months. That way, you can monitor your credit reports on an ongoing basis. For best results join a credit monitoring company that alerts you any time someone request credit in your name. For more information on your free credit reports, visit the Federal Trade Commission web site at www.ftc.gov/bcp/conline/pubs/credit/freereports.htm.

How to order your free annual credit report: