Its seems that we encourage indentity theft more than we prevent it.  Some hackers are coming forward and explaining just how simple it is to gain access to your private information and exploit it.  Even Paris Hilton has experienced indentity theft using a simple "Forgot Password" trick.  

Here is a hint how....her dogs name is very well known. Those general questions that they ask as security questions are very easily found out.

Here is a great article on exactly how your information is compromised by a confessed hacker.

Hacker Confessions