Identity Fraud Is Surging: Ways to Protect Your Money and Credit

A new IdentityIQ fraud report finds that criminals are using artificial intelligence and stolen personal information to open fraudulent accounts, and the damage can follow victims for years. Here’s how you can spot trouble sooner and safeguard your financial future.

Many know to watch bank statements for unfamiliar purchases. But today’s identity thieves are increasingly targeting something bigger than the money currently sitting in your account: your ability to borrow money in the future.

The new IdentityIQ 2025 Fraud Report found that alerts connected to potentially fraudulent new accounts increased 65% in 2025 compared with 2024. That means more criminals may be using stolen or partially fabricated identities to apply for credit cards, personal loans and other financial accounts in someone else’s name.

“Identity fraud has entered a new era,” says Michael Scheumack, a scam prevention expert and chief innovation officer at IdentityIQ. “What we’re seeing is a shift from isolated incidents to highly automated, AI-enhanced fraud campaigns that can create damage before a consumer even realizes their information has been compromised.”

Identity theft can damage more than your bank balance

An unfamiliar charge can often be disputed quickly. A fraudulent loan or credit account, however, may go unnoticed until the criminal stops making payments.

IdentityIQ’s proprietary data showed that major negative credit events increased 39%, while derogatory trade lines—accounts reporting serious payment problems—increased 32%. These events can include collections, defaults and charge-offs that may hurt a victim’s credit history.

“A fraudulent account opened today can quickly turn into collections, charge-offs and years of credit repair,” Scheumack explains. “The real story isn’t just that fraud is increasing—it’s that the consequences are becoming more severe and longer lasting.”

The harm can reach nearly every part of a household budget. Damaged credit may make it harder or more expensive to obtain a car loan, mortgage, apartment, credit card or insurance policy.

How AI is helping scammers fool consumers

Artificial intelligence allows criminals to create convincing emails, fake websites, deepfake videos and cloned voices in a fraction of the time it once took.

A caller may sound exactly like your daughter, grandson or close friend. An email may include your name, workplace or other personal details. And a fake application may combine a real Social Security number with a fabricated name, address or date of birth to create what is known as a synthetic identity.

“AI is making fraud more personal and more believable,” Scheumack says. “The old warning signs, poor grammar, a robotic voice or a generic message, are becoming less reliable. Consumers have to slow down and independently verify what they’re being told.”

IdentityIQ’s report warns that synthetic identity fraud is becoming more common as thieves combine legitimate personal information with invented details, establish a credit history and then exploit it for larger amounts of money.

The biggest danger may be delayed discovery

Many people assume they will know immediately if their identity is stolen. But a fraudulent account could remain hidden for weeks or months, especially if bills and statements are sent electronically or to a different address.

“Consumers often think the crime ends when a fraudulent account is discovered,” Scheumack says. “But by that point, the damage may already be spreading through their credit profile. The biggest trend we’re watching is the growing gap between when fraud occurs and when it’s detected. In the age of AI, that gap can be incredibly costly.”

The sooner you discover suspicious activity, the sooner you can contact the lender, freeze your credit and begin disputing the account.

6 ways to help protect your identity and credit

1. Check your credit activity regularly

Review your credit reports and pay attention to alerts involving new accounts, credit inquiries, address changes or sudden score fluctuations.

IdentityIQ theft and credit monitoring services or similar services can watch for changes and provide alerts when potentially suspicious activity is detected. IdentityIQ also offers access to identity restoration assistance if a member becomes a fraud victim.

“Credit monitoring acts like an early-warning system,” Scheumack says. “It cannot stop every crime, but it can help you identify suspicious activity before the financial damage becomes even more difficult to undo.”

2. Consider freezing your credit

A credit freeze generally prevents lenders from accessing your credit file to approve a new account. You can temporarily lift the freeze when you legitimately apply for credit.

For the strongest protection, freezes can be placed separately with Equifax, Experian and TransUnion.

3. Verify unexpected requests independently

Never use the phone number, email address or link supplied in a suspicious message. Instead, contact the person, bank or company using a number you already know or one listed on its official website.

“Urgency is one of a scammer’s most effective weapons,” Scheumack warns. “When someone tells you to act immediately, send money or keep the situation secret, that is your signal to stop and verify.”

4. Create a family safe word

Choose a private word or phrase that family members can use to confirm their identity during an emergency. This simple step can help protect against calls involving cloned voices.

Avoid choosing an answer that could be discovered on social media, such as a pet’s name, birthday or favorite sports team.

5. Strengthen your online accounts

Use a unique password for every important account and turn on multi-factor authentication whenever it is available. An authenticator app or security key may offer stronger protection than a text-message code.

Also avoid sharing unnecessary details, such as your full birthdate, travel plans or family relationships, on public social media profiles.

6. Act immediately when something seems wrong

Contact the financial institution involved, change compromised passwords and freeze your credit files. Review your other financial accounts for suspicious activity and report identity theft to the Federal Trade Commission.

IdentityIQ members can also work with a dedicated identity restoration expert who can help develop a recovery plan, dispute fraudulent activity and navigate the restoration process.

The bottom line

The new generation of identity theft may be faster, more convincing and harder to recognize—but consumers are not powerless.

“Do not wait until you are denied credit or contacted by a debt collector to start paying attention to your identity,” Scheumack says. “Monitoring your credit and personal information gives you a chance to catch fraud earlier, respond faster and protect the financial life you have worked so hard to build.”

The information provided in this article is for general informational and educational purposes only. It is not intended as legal, financial, medical or professional advice. Readers should not rely solely on the content of this article and are encouraged to seek professional advice tailored to their specific circumstances. We disclaim any liability for any loss or damage arising directly or indirectly from the use of, or reliance on, the information presented.