(MONEY Magazine) – Recently I appeared on NBC's Today show to talk about identity theft. That's what it's called when someone steals a key piece of your personal data and uses it to impersonate you financially, usually spending as much as possible in a brief period of time. It's a growing problem--there are now around 400,000 victims a year, according to the Privacy Rights Clearinghouse, and that number is increasing by about 40% annually.

When I'm on TV, I often get a flurry of responses. This time I got an avalanche.

Many of the responses came from victims like Kevin and Janet Smith. In 1995, a niece swiped a pre-approved credit-card application from Janet's home, filled it out and sent it in. Janet didn't discover this until 1997 when she went to co-sign a car loan. "Sorry," the manager said, handing her a copy of her credit report. Janet was stunned. It listed credit cards she'd never applied for, bills long overdue and an address she recognized as that of her niece. But knowing who the culprit was didn't mean her troubles were over. The Smiths were turned down for a home-equity loan. They couldn't renew their credit cards. Clearing her name cost countless hours and $80,000 in legal fees. "It's like stepping in gum," Kevin says. "You can't get out of it."

The best way to fight this problem is proactively. First, though, you need to understand how it happens. Despite fears spawned by the Internet, identity theft is still typically a low-tech crime. Mail is stolen. Garbage cans raided. Thieves posing as employers or landlords order copies of your credit report. What they're after most often is your Social Security number. That key piece of information allows them to apply for credit in your name while keeping you in the dark--sometimes for years.

While your liability is capped at $50 (as with a stolen credit card), the true cost of identity theft is a massive headache. It can make it tough to get loans, jobs, apartments, even a decent rate on car insurance. Here's what to do:

--Clean out your wallet. Don't carry your Social Security card, birth certificate, passport or credit cards you don't use. Put the first three in a safe or deposit box. Cancel the cards.

--Get off mailing lists. Pre-approved credit offers can do the most harm. Removing your name from the marketing lists of the three major credit bureaus will reduce solicitations dramatically. All it takes is a single phone call: 1-888-5OPT-OUT.

--Protect your Social Security number. Stop giving it out routinely. You must provide it to the IRS, to your employer, and for financial transactions. But many use it simply for convenience. PRC director Beth Givens suggests asking if another number can be substituted or if a few digits will suffice.

--Check your credit. Pull your credit report from Experian (888-397-3742), TransUnion (800-888-4213) or Equifax (800-685-1111) twice a year. The most it'll cost you is $8 a pop.

Finally, if you are victimized, report it immediately to the police and all three credit bureaus (ask that you be contacted to verify all future credit applications). Close all accounts that have been tampered with and open new ones. Only in extreme situations will you want to change your Social Security number--if you do, it's up to you to notify all credit bureaus and creditors of the change.

Editor-at-large Jean Chatzky appears regularly on NBC's Today. You can contact her by e-mail at moneytalk@moneymail.com.