Identity Theft and Your Credit Score
Fraudsters and security experts are engaged in a constant cat-and-mouse battle. As the latter creates more advanced security methods, the former develops new ways to exploit them. This means that while cyber security is more advanced than ever, identity theft and online fraud is more common than ever and becoming increasingly common with each passing year.
It’s also impacting the average citizen more than it ever did. In 2012, over $22 billion was stolen from over 12 million identity theft victims. Five years later, that sum had dropped to $17 billion, but the number of affected individuals had increased to 16 million.
Identity fraud can happen to anyone at any time. It’s not always something you can prevent, and it doesn’t always have an immediately obvious purpose. Fraudsters don’t simply want your bank balance or assets—they’re targeting your livelihood, your reputation, the thing that you have spent years building.
If you’re a victim of identity theft, you stand to lose much more than a few bucks. If you’re not careful, the damage done by one fraudster could take you years to repay.
How Identity Theft Can Affect Your Credit Score
The reason identity theft victims are more numerous than ever before is because fraudsters have cast their nets further afield, focusing on pretty much every creditworthy citizen they can get their hands on.
You don’t need to be the victim of a phishing scam to have your identity stolen. In most cases, victims are not even aware they have been targeted until they’re rejected for a loan or mortgage. At this point, they realize their credit report is littered with accounts they didn’t create and derogatory marks that had nothing to do with them.
What is Identity Theft?
Identity theft occurs when criminals steal your personal information and use it to pose as you. They may steal your social security number to commit credit card fraud or apply for a loan they have no intention of repaying. After all, they’re not the ones who will suffer the consequences if the account defaults or enters collections.
Why Does Identity Theft Affect Your Credit Score?
If a criminal has assumed your identity, they can use it to apply for loans and credit cards, open new accounts, establish large lines of credit, and more. And don’t assume they will be refused applications just because you face a brick wall every time you apply.
Criminals are much less discerning. Not only will they flood your credit report with applications and send your score plummeting, they’ll also apply to high-interest loans and credit cards.
What are the Most Common Forms of Identity Theft?
Identity theft can occur in many forms, from social security theft to credit card fraud and more. Here are a few of the most common types of identity theft:
Credit Card Theft
If a scammer steals your credit card information, they can use it to make purchases in your name, running a high bill. This information can be stolen any number of ways, including:
- Physical theft of your card
- Theft of your number by a bank or retail employee
- Online data breach
- Retail card machine skimmer
If a fraudster accesses your email address, they can pose as you on a number of websites and gain access to a host of details. Many websites will send you an email if you have forgotten your password, and scammers can use this to recover passwords for payment services, retailers, and even credit reporting agencies.
Email passwords are some of the most unsecured passwords we have because they are often one of the first accounts we create, which means we still use the same password we used any years ago and have since used on dozens of sites. But they are also one of the most important accounts and should be secured with unique passwords.
Snail Mail Theft
In the old days, scammers would rummage through your mail to find bank details and credit card offers, before posing as you. These days most scammers employ the same tactics via email, but there are still those who prefer to go old school. Your mail contains very sensitive information and needs to be kept safe.
Data breaches are very common and account for a huge percentage of the billions of dollars lost to identity scams every year. Scammers target sites that store a lot of customer data and then sell this data on the dark web.
In most cases, the data basic, and includes passwords and email addresses to accounts that you may have forgotten about and accounts that don’t hold any sensitive financial information.
However, the vast majority of individuals use the same passwords and usernames across a host of sites. Scammers know this, so they’ll take that user data and try to log into more secured websites, from online banks and payment systems to retailers and more.
Data breaches can happen anywhere; no one is safe. If you’ve been using the internet for more than a few years and have joined countless sites in that time, there’s a good chance your details will have been stolen. Just take a look at some of the biggest victims of this crime:
- Adult Friend Finder
- PlayStation Network
- Home Depot
- Capital One
- Google Plus
- British Airways
There’s very little you can do to prevent this, except to make sure that you use a different password for all secured and personal accounts. That way, if your details are stolen elsewhere, they won’t provide criminals with access to the stuff that matters.
A phishing scam typically begins with a spoof email claiming to be from an official retailer or government organization. These emails often play on the victim’s fear or greed, asking them to click a link and claim a cash sum (such as a tax rebate) or warning them that their account has been hacked by criminals (we’re sure the irony doesn’t escape them).
However, these emails have also been known to cover simple, seemingly innocuous subjects. For instance, many Amazon and eBay scams send the user a confirmation email, the same emails they get when they place an order. It confirms that their order has gone through, states the total order amount (often a large sum of money) and then reminds them that if they click a link and login, they can cancel the order.
In any case, when the recipient clicks that link and enters their details, they are sent straight to the scammers. One of the cruel ironies of this scam is that you may receive confirmations for products you didn’t order if your identity has been stolen or your account has been hacked. If you receive such an email, therefore, you may assume that you’ve been the victim of identity fraud, in which case you’ll be quick to click the link and resolve the problem.
In such cases, we recommend always visiting the site directly by inputting the URL into the toolbar and then logging in. If you’re contacted by the IRS, don’t click any links and simply call them.
It’s important to always make sure you’re using a secured connection. If not, your online activity and all the data on your computer could be at risk. Hackers use software to hijack unsecured networks and capture all the data transmitted through that network.
This is true whether you’re using a home network (they have been known to drive around looking for unsecured networks, before parking outside and hacking their way in) or a public network. Avoid these networks when possible and if you absolutely can’t resist, then make sure you avoid visiting any sensitive sites or inputting any passwords or personal data.
How to Get Rid of Fraudulent Accounts in your Name
If someone is opening accounts in your name and making a mess of your credit report, there are a few steps to clear your name and return your credit score to its deserved range:
Place a Fraud Alert
Contact one of the three major credit bureaus and file a fraud report. The credit bureaus will then inform the others and place alerts that will remain in place for 90 days.
Once these alerts are locked-in, lenders are required to take additional steps to verify your identity before agreeing to provide you with any new loans or credit cards.
Remove Fraud Accounts
If your cards or bank accounts have been used without your authorization then contact your provider’s fraud department and they will resolve the issue for you. They should refund you the money that was stolen, but only if you report them quickly and it’s obvious that you were not at fault.
File an Identity Theft Report
An identity theft report can be filed via the government’s official ID theft recovery plan and allows you to quickly and easily despite activity with creditors and credit bureaus.
File a Police Report
Take the identity theft report to your local police department. This is a common, widespread issue and it’s often something that law enforcement can do little about, but it’s still a crime and you still need to file a report. The police report will also help you if you encounter any issues when disputing charges and accounts.
Start the Dispute Process; Initiate a Credit Freeze
You can now use the police report to start disputing all activity that doesn’t belong to you. Send the credit bureaus a letter with this report attached and make a note of all the accounts that you had nothing to do with. They are required to send you a response within 30 days.
You can also place a security freeze on your account, which will prevent any new lines of credit from being created and will also stop lenders and creditors from accessing it. It doesn’t cost you anything and can provide you with an extra layer of security while you go through this process.
How to Protect Your Credit Score from the Effects of Identity Theft
Anyone can be a victim of identity fraud. It doesn’t matter how diligent you are, and, in some cases, an overly cautious attitude can do more harm than good.
There is an entire generation of non-savvy internet users who refuse to process payments online because they’re worried that their details will be stolen. Instead, they choose to phone the company direct and give their details over the phone.
The irony here is that the sales representative on the other end of the phone will simply input those details into the same system used by all online customers. The only difference is that you’re adding an extra middleman to the process, creating a chink in what is otherwise a solid chain.
You can be a victim of identity theft if you have ever given sensitive information through the internet or over the phone. Social media has proven to be a goldmine for fraudsters, because while they can’t steal your ID by mining basic data such as your name, address, and age, they can use this data to dig a little deeper and access bank accounts.
To prevent this from happening keep the following tips in mind:
- Only give out your Social Security Number when absolutely necessary and don’t keep it in your purse or wallet.
- Check your mail on a daily basis, looking for letters regarding accounts you didn’t create.
- Use secure passwords online, preferably with a unique password for each account.
- Don’t give anyone access to your email address.
- Only use secure Wi-Fi connections and install a firewall on your computer.
- Keep a close eye on your credit report and check with all major credit bureaus.
How to Repair Your Credit Score After Identity Theft
It’s not the end of the world if you have been the victim of identity theft. Providing you didn’t open those accounts or make those applications, then everything should be cleared in time and your credit report will return to normal.
It can be a very stressful period and depending on the extent of the damage and how long it takes you to notice it, this process could take days, months or years. But it will resolve in the end.