Data Breaches and Your Credit Score

Your data is incredibly valuable to the companies tasked with selling you products and services. It can help them determine what you’re likely to be interested in and how much you’re likely to spend, information that is often sold to the highest bidder, whether you realize it or not.

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Every time you browse social media, use a search engine or download an app you’re giving your details to these companies and creating a digital footprint that makes you a valuable commodity. But as nefarious as this process may seem, there is something even more reprehensible underneath it all.

Because not only is your data valuable to the people seeking to market and sell—it’s also valuable to the people seeking to scam and steal. Data breaches have become incredibly common over the last few years as organized criminals gather, process, and distribute user data like some virtual narcotic.

If you have ever used the internet or placed any of your details online, regardless of how innocuous that placing might have seemed, you’re exposed to these breaches.

How a Data Breach Can Impact You

Data breaches are becoming increasingly common. Some of these, like the 2013 Yahoo breach, result from persistent hacks, others, like the 2019 Facebook breach, are caused by a lapse of judgment.

These two incidents affected over 3.5 billion accounts, and they are just a small number of the many breaches that occur every year. It’s difficult to avoid them without shunning the internet and living in a tent somewhere, but the good news is that the breaches aren’t always as damaging or as terrifying as they might seem, because in many cases hackers can’t do much with your data.

What Data is Stolen?

Data breaches vary in size, type, and severity, but none of this really concerns you as a victim. The only thing that matters is, “What data do they have?” and most of the time, the answer is, “Very little.”

Credit card and bank account information is treated a little different by the website’s security systems and it’s very rare for this to be stolen. If hackers do download it, it’s often in the form of undecipherable code, which is useless to them.

The data they can see covers basic information such as:

  • Name
  • Email Address
  • Physical Address
  • Phone Number
  • Username
  • Password

In fact, many data breaches occur on sites that only collect this information and don’t collect any sensitive financial information. These sites often have much weaker security than their more sensitive counterparts and are therefore easier targets.

What Can a Person Who Has Stolen Your Identity Do with It?

Although hackers rarely get hold of credit card and bank information, in most cases they don’t need it. A hacker will download all the aforementioned data and then sell it on the dark web, often in bulk batches that means a single user’s data sells for just a couple of cents.

Purchasers will then scour this data looking for active users, as well as usernames/passwords that match other data sets. If, for instance, they find that Person A uses the same username and password on two separate sites, there’s a good chance they’ll use the same data on many other sites as well.

The hacker will then seek to use that data to access the individual’s email accounts, bank accounts, or online payment accounts, knowing that if they keep trying multiple accounts, they’ll get into one eventually. If it’s an email address, they can then reset passwords and gain access to more secure information; if it’s a bank, they can clear them out. They may obtain social security information, debit card details, credit card numbers, and more.

So, while the data stolen during these breaches can seem inconsequential, it can lead to complete theft of someone’s identity.

What Damage Can a Data Breach Do?

A data breach can cause serious damage to your credit report, as discussed in the next section, but that’s not all. It can create endless stress and worry for the victim and can also cause massive financial and reputational losses for the company involved.

It’s easy to think that the company gets off lightly and doesn’t suffer as much as their members do. But this couldn’t be further from the truth. A data breach is a PR nightmare, one that requires a lot of expensive cleaning-up, as well as security improvements, compensation claims, and more.

How Can a Data Breach Impact Your Credit Score?

A data breach won’t impact your credit report or credit score directly. However, the scammers may use your data to apply for loans and new lines of credit in your name. This will greatly increase the amount of hard inquiries and new accounts showing on your report. And because they have no intention of repaying those debts, you’ll also start seeing missed payments, defaults, and collections, all of which can significantly reduce your credit score.

Fortunately, as discussed in our guide to Identity Theft and Your Credit Score, all of this is reversible. If you remain diligent and stay on top of these data breaches, you can even prevent such issues from occurring in the first place.

The Best Credit Monitoring Servings

One of the ways you can catch serious identity theft before it does any damage is to apply for a credit monitoring service. These services will monitor your credit report and then warn you whenever a sudden change has occurred, as would be the case if you were the victim of identity theft. 

These services often trawl the dark web for your details and then send you a warning when they find them, allowing you to take immediate action.

Credit monitoring services generally cost up to $20 a month and while there is such a thing as a free credit monitoring service, it may not be as quick or as efficient as required. Here are a few of the more popular credit report monitoring services available right now:

  • Identity Guard: This option is expensive, but it has some solid solutions for identity theft and can ensure your social security number and other essential data remains safe.
  • Privacy Guard: A relatively inexpensive service that offers daily credit report monitoring.
  • Identity Force: Theft insurance is provided on all accounts and there are a couple of options available at different price points.
  • Experian IdentityWorks: Although it is provided by just one of the three credit bureaus, this monitoring service actually monitors your reports across all credit reporting agencies.

Learn About Recent Data Breaches

Some data breaches make headline news, others simply aren’t announced. It’s not something that companies are keen to declare, even though they are morally obligated to do so.

There is no easy way to learn about these breaches, but if you use the same email address involved with a breach then the company may contact you to announce it and advise that you change your password. You can also learn about data breaches through the aforementioned credit monitoring services.

Can the Company Protect you?

If you are a victim of credit card fraud, your provider will cover your losses. This is generally true for all credit cards and is one of the benefits they provide. However, the same isn’t necessarily true for websites that have been breached.

If, for instance, your name, email, and password is stolen from a social media site and then used as part of a phishing campaign to scam you, the site won’t cover your losses. The onus is on you to stay secure and employ some of the techniques outlined below to keep your data safe. 

Steps to Stay Protected After a Data Breach

If you have discovered you have been the victim of identity theft or have just learnt that your details are being sold on a third-party site, here’s what you need to do:

Change Your Passwords

If an account has been compromised, it’s time to log in and change your details. Just because your data is being sold doesn’t mean that someone has accessed your account. It may take a while for this to happen, during which time you can change your password and effectively lock them out.

You should also change any other accounts that use the same password, even if they are tied to a different email address or name. While many scammers will simply give up if a password doesn’t work and then move onto the next one, more resilient ones may track you down on social media, getting more valuable information about your online activity and finding alternative ways to hack your accounts.

Create Unique Passwords

It’s a chore, but it could save you a lot of stress and ensure you don’t fall victim to identity theft in the future.

You can use password reminder services to help you with this. They are built-into your browser and will create unique codes and then do all the remembering for you. You can also create your own system that you’re confident you will remember.

For instance, create an original password that is 7 characters long, contains a mixture of letters and numbers, and is easy to remember. Once you have that, then you just need to create a code for every new site you join.

If, for instance, your password is 1234567 and you join Amazon, then you may use AMAZ1234567 or 123AMAZ4567. If you join eBay, it will become EBAY1234567 or 123EBAY4567.

Use Additional Security Methods

Security methods like two-factor authentication can help you protect your most important accounts, including bank accounts, credit card and debit card accounts, and anything that is connected to your social security number.

Many sites hosting sensitive financial data will insist on several additional security steps, including unique codes, questions, and more. It adds a few seconds to the sign-in process but could save you a lot of time, stress, and money.

Fraud Alert or Credit Freeze

Just because your data is being sold somewhere doesn’t mean your entire online presence is at risk. If you check your credit report regularly and haven’t noticed any anomalies, then changing your passwords and improving account security might be enough.

However, if you’re starting to see credit accounts that don’t belong to you or you’re worried that scammers have stolen your social security number, you will need to take more drastic action. 

One of the things you can do is place a fraud alert on your account. A fraud alert will remain for 90 days across all major credit bureaus and will require creditors to initiate extra checks before lending you money. This way, if someone is pretending to be you to apply for a credit card or loan, they will fail the final checks.

You can also apply for a credit freeze, which will effectively block all creditors and scammers from accessing your credit report and allow you to get your accounts in order.