Identity theft can be a stressful and anxious situation. Despite millions of us being impacted by identity theft every year, very few of us understand the true impact that it can have on our lives.
Identity theft can leave you with large debts, phone calls from lenders and government officials asking for you to repay debts, and countless hours of lost sleep in worry!
This article will help you further understand the impact that identity theft can have on your credit report and your life as a whole.
What Is Your Credit Report?
Your credit report tends to hold a particular set of information that helps you get loans, employment, and homes. It can also include a slew of other pieces of information such as…
Your Credit Accounts
This list of accounts includes any credit card and bank accounts and other credit agreements such as outstanding loan contracts or payment records for utility companies.
These accounts show if you have made repayments before deadlines or missed deadlines. Late or missed payments stay on your report for six years and impact your overall score.
Your Financial Links
Your credit report will show the details of anyone you are financially linked with, including joint accounts with your partner, for example.
This information includes bankruptcies, repossessions, debt relief orders, and other information. This information also lasts for at least six years.
Your Account Provider
Your credit report shows any details of overdraft information related to your current account.
Other information included in your credit report is your electoral register, your current and previous addresses, and your date of birth.
What is Identity Theft?
Identity theft occurs when identity thieves access as much information as possible about an individual’s identity to commit identity fraud. The sort of information they require includes your date of birth, name, current address, or social security number (SSN).
If you become a victim of identity theft, you could be highly susceptible to fraud, and your finances can be at risk.
Identity hackers can use your details to open bank accounts fraudulently, obtain credit cards or debit cards, state benefits and loans, order goods with your details, and take control of your existing accounts.
On top of that, they can gather genuine documentation, such as a driving license or passport.
How Does Identity Theft Impact Your Credit Report?
If a fraudster can access your account and apply for credit with your credentials, this will be marked as a hard search on your credit report. When you apply for a loan in the future, other lenders will be able to see this hard search on your report.
If there are many hard searches on your report, some lenders will see this as desperation and deem you a higher-risk applicant. This view can lead to them declining your application altogether.
If the identity thief completes their credit application, that debt will be placed under your name. As you can imagine, hackers have no intention of paying off overdrafts or loans. Therefore, these unpaid loan debts will impact your credit score negatively, leaving you with a bad credit score.
It is possible to rectify this information once you have successfully proven identity theft has occurred, but this can take a long time. While the investigation is ongoing, it will be harder to get accepted for loans or mortgages.
If the issue is not resolved, these bad debts will stay on your credit report for up to six years.
What is the Impact of a Bad Credit Score?
If you have a poor credit score, you will find it extremely difficult to take out a loan. Lenders will review your credit score and likely have a minimum score that you must meet to be accepted.
If your score is poor, even if that is due to identity theft, lenders will either offer you a bad loan offer, where the interest payments are astronomical or not offer you a loan at all.
The same will occur when you apply for a mortgage. As with loan lending companies, mortgage lenders will be wary, to say the least, if you have a poor credit score. No matter what leads to this score, you will find it hard to get a good mortgage offer with a bad credit score.
The only way to counteract this is by putting a large downpayment down or applying with someone else that has excellent credit.
Calls From Debt Collectors
If lines of credit have been fraudulently taken out in your name without you knowing, you may receive some unfriendly calls from debt collectors.
Identity thieves have no intention of paying off loans they take out. All they are after is the money.
However, that money has to come from somewhere! Lenders will assume you have taken out the loan and will therefore pass your details onto debt collectors when repayments are missed.
This can result in aggressive phone calls from debt collectors and lots of stress and anxiety.
Ways to Prevent Identity Theft
All those impacts can seem quite scary! But don’t worry. You can take several steps to keep your data and social security safe and secure online and make it much trickier for an identity thief to access it.
Keep Your Details Safe and Minimal Online
Firstly, whenever you are about to input your information into a business, check that they are legitimate beforehand. There are so many websites that will do the hard work for you and establish whether a company is trustworthy or one you should steer clear of.
Once you have established that the company in question is trustworthy, make sure you only provide the necessary personal information when creating an account.
In some instances, information such as date of birth, social security, or your mobile number are not required fields, so do not fill them in.
The less information about you online, the less a hacker can access.
Use Unique Passwords
Next, make sure that each time you create a new account online, you do so with a unique password. I know this process can be very confusing, and it is much easier to memorize one password. But if you choose to use one password across all of your accounts, a cybercriminal only needs to get access to it in one place, to then use it on any other accounts you have!
The best option is to create highly unique passwords. To make sure you never forget them, write them down in a password-protected excel or word document, or even on a piece of paper in your home.
Don’t Open Links or Emails you don’t Trust
Next, don’t open emails that seem suspicious or that are sent to you via unknown sources. You might have experienced phishing emails in the past, but cybercriminals are becoming more advanced and devious every day, so they are not as easy to spot as they used to be.
If your friend sends you a suspicious-looking email with a link attached, don’t simply open it without stopping and questioning it. Drop your friend a message on another social media platform to see if the email is legit or if they have been hacked.
If you spot a phishing email, mark it as spam, and delete it from your computer without opening it.
Freeze Your Credit Report
Next, if you notice anything that looks suspicious on your credit card bill, your credit report, or anywhere for that matter, then you should contact one of the major credit bureaus and freeze your report.
This action means a credit card company or potential creditors cannot access your report, and hackers will find it much harder to get into your account and request new lines of credit.
When you contact one of the three major credit reporting companies, they will inform the other two to freeze your account on their system as well.
You will be given a PIN, which you can use to unfreeze your credit report when necessary. Credit freezes are an excellent way to tackle hackers in the short term. However, they do prevent you from applying for loans or mortgages, as lenders cannot access your information.
Contact Identity Theft Insurance Companies
Finally, to ensure you’re as safe as possible online, you should consider working with an identity theft insurance company.
They provide many great benefits that help you notice potential identity fraud before it occurs and services that take much of the stress and anxiety out of the picture if you are a victim of fraud.
Top Features of Identity Theft Insurance Companies
Dedicated Customer Support
Leading identity theft insurance companies provide you with dedicated specialist customer support for starters. These support teams have been trained specifically in dealing with identity theft and will be much more helpful than if you reported the theft to law enforcement, for example.
In some cases, such as with Aura, the customer support is 24/7. So, no matter when you are targeted, you can get straight in contact with someone who will help you prevent severe damages from occurring.
Other companies, such as Identity Guard, will provide you with a personal support manager if you are ever the victim of fraud. It can be highly reassuring to know there is someone whose sole job is to help you deal with these issues when your social security has been stolen.
Another reassuring benefit is the insurance. Leading identity theft insurance companies offer as much as $1 million in cover! So if the worst-case scenario does occur and you are the victim of identity theft, you can relax somewhat, knowing your insurance covers any financial issues.
One of the significant impacts of identity theft is watching helplessly as your savings are depleted. Now, even if an identity thief manages to access your accounts and take money out, you will be able to claim that money back as part of your insurance premium.
Another great benefit that identity theft insurance companies offer is a fraud alert. These alerts are sent to you when anything suspicious occurs regarding your online personal information.
For example, if it looks like someone is applying for a loan with your details, but they are doing so from somewhere near your home address, this might be deemed suspicious.
The identity theft insurance company will then contact you with an initial fraud alert, asking you to clarify it is you.
If it isn’t, you will be able to flag the identity theft early enough to prevent it, thanks to this initial fraud alert.
Some companies offer a free app for your phone as part of their service. This app allows you to receive notifications while on the move, making it even easier to flag identity theft early and prevent significant issues.
Finally, companies like Life Lock offer their customers the option to “lock” their credit score. This can also be referred to as a soft version of a credit freeze.
Credit locks are much faster to implement than a credit freeze but have a similar desired effect. Credit locks make it much trickier for hackers to access your account.
So if you want to investigate something suspicious in more detail, you can quickly log in and lock your credit report until you are confident nothing fraudulent is occurring.
The speed you can lock and unlock your credit compared to a security freeze makes this option much more flexible.
In summary, identity theft will undoubtedly show up on your credit report. However, if you take the right steps to amend this, your report will remove the theft, and your record will be restored.
However, if you choose to tackle this on your own, it can take a long time, and in some instances, if there isn’t enough evidence of fraud, you may not be able to remove it.
If that is the case, this impact will show on your credit report for as many as six years.
If you don’t want to run the risk of having identity theft permanently impact your credit score and ability to take out loans in the future, be sure to check out some of the identity theft insurance companies available to you.
Having someone in your corner for when the worst-case scenario occurs is hugely reassuring and will ensure the impact of identity theft on your credit report is minimal at best.