How Identity Theft Can Hurt Your Credit Rating — And What You Can Do About It

Identity theft can impact your credit and funds in significant ways — a few of that are hard to recuperate from. This makes it especially essential to catch any signals of identity theft early, before they’ll wreak havoc in your personal funds.

Read on to see how identity theft can impact your credit and the right way to best protect yourself and your wallet.

How does identity theft impact your credit rating?

While there are several types of identity theft — a few of which involve the stealing of medical information and even house titles — most practices involve getting access to your Social Security number and other personal information which may allow identity thieves to open latest accounts under your name.

A scammer along with your SSN and other personally identifiable information (PII) can use these to use for bank card accounts or loans without your knowledge. In the event that they’re approved, they’ll typically rack up bank card debt or use up the loan funds without paying them back, leaving you with a credit report riddled with defaults and late or missed payments.

Because payment history and the quantity of debt owed account for greater than half of your credit rating, multiple late payments, defaults and/or maxed out bank cards would bring even an exceptional rating into the “poor credit” classification.

protect your credit from the consequences of identity theft

The specter of identity theft can’t be overstated; but there are things you possibly can do to mitigate its damage.

Monitor your credit report

Unfortunately, most victims of identity theft only discover in regards to the fraudulent activity once they’re denied a loan or a bank card resulting from poor credit. Because of this it’s so essential to observe your credit report, monthly if possible.

There are several ways you possibly can achieve this.

You’ll be able to request weekly credit reports from all three major credit bureaus (Experian, Equifax and Transunion) at no cost from AnnualCreditReport.com. While these won’t contain your rating, you’ll have the ability to envision the credit accounts and credit inquiries reported under your name.

And, should you see any you don’t recognize, you must dispute the suspicious activity with the credit reporting agencies immediately. While mistakes do occur and accounts for similar names may very well be reported within the improper credit report, multiple latest credit accounts that you simply didn’t open may very well be an indication of identity theft. Either way, it’s essential you contact the credit bureaus to correct the error as soon as possible.

If requesting the credit report and analyzing it is simply too time-consuming, you must consider credit monitoring or identity theft protection services, a few of that are free. These services warn you in case your personal information has been compromised and may also notify you to any changes in your credit report.

If you might have a bank card from a significant bank resembling American Express, Chase or Discover, be sure that to envision your advantages as free credit monitoring may be one in all them.

Freeze your credit or place a fraud alert

When you discover you’ve been the victim of ID theft otherwise you’ve been informed that your personal info was leaked in a knowledge breach, freezing your credit or placing a fraud alert may be good next steps.

A credit freeze is a process whereby bureaus limit third-party access to your credit history. If someone were to attempt to apply for a latest line of credit while your credit is frozen, the lender wouldn’t have the ability to access your credit history and can deny the appliance.

For this to be effective, you’ll need to put a freeze individually with each credit bureau, but you possibly can achieve this in a matter of minutes from their web sites by making a free account. At any time when you’re able to apply for a line of credit, you’ll have to go to that very same site and lift the freeze or “thaw” your credit.

A fraud alert is barely different and is usually placed once you recognize you’ve been a victim of ID theft. You’ll only have to contact one credit bureau, which is able to notify the others. With a fraud alert in your credit file, if a bureau receives a request to review your credit as a part of an application, it is going to notify the lender that it must take extra steps to substantiate the identity of the one who’s making the appliance. Because of this they need to contact you directly and ask whether it was you who filled out the appliance.

Repair any damage to your credit

If the fraudsters’ actions have already hurt your credit, you must start taking immediate steps to repair it.

First, dispute any incorrect items with the credit bureaus and lenders themselves. Note that this will probably be easier if you might have proof that your identity was stolen. Try our article on Detecting ID Theft — And The 5 Steps You Need To Take Immediately for the steps it’s worthwhile to take.

In case your credit has been substantially damaged and there are multiple accounts already listed in your report, you might consider a credit repair company. These corporations will examine all of your reports for negative items and dispute incorrect or unfairly reported information for you.