Identity theft is a growing digital risk that can harm finances and personal security. It occurs when someone misuses your personal information for fraud. Common warning signs include unknown transactions, credit issues, and missing bills. To prevent it, use strong passwords, enable multi-factor authentication, avoid suspicious links, and monitor financial accounts regularly. Securing devices, protecting sensitive data, and avoiding public Wi-Fi for transactions also help. Regular credit checks and identity protection services add extra safety. While no method is foolproof, consistent precautions can greatly reduce risks and protect your identity.