How Identity Theft Destroys Your Credit Score

Joseph Meyer
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Personal Identifying Information Gets Into The Wrong Hands

Identity theft is one of the fastest growing crimes in the world, and it’s easy to see why. According to a 2013 study by Javelin Strategy & Research, only 0.7% of victims reported their identity theft to police authorities, while 50% leaked at least one person’s Social Security Number (which is not usually publicly available) or banking account information. Another alarming statistic is that 12% of identity theft victims found that their names and addresses were used to open auto loans. 10% found that they were the victims of utilities fraud, and 16% had their mail misdirected or rerouted.

One of the biggest reasons for the increase in identity fraud is the ease with which it can be carried out. In the past, identity theft victims usually had to physically intervene in the identity theft process (e.g. pickpocket a victim’s wallet). Today’s crooks don’t have to get their hands dirty. They can steal the necessary data through:

  • Online shopping: Identity thieves can gain access to your credit card and bank account numbers through online shopping.
  • Hacked databases: If you don’t constantly manage your passwords and personal information on the Internet, you greatly increase your probability of being the victim of data breach.

How An ID Thief Can Wreck Your Credit Score

A study by Atlanta-based identity protection company LifeLock found that 93 percent of Americans think identity theft is a problem, but only 45 percent feel they will ever be personally affected by it. The study also found that less than half believe they have the knowledge and skills to help a friend or family member who has been a victim of identity theft.

In reality, it can take as little as 60 seconds for an identity thief to wreak havoc on your credit. Identify theft is the fastest-growing crime in the U.S. and easy to commit because thieves can steal your personal information in a number of ways.

Here’s how an identity thief can quickly wreck your credit score in as little as 60 seconds:

Gain access to your mail in a number of ways

A thief can simply break into your mailbox, wait for your mail to arrive, or swipe your mail from your mailbox as you walk away from your home or office mailbox. In addition, it’s becoming more common for mail carriers to deliver letter-sized mail through slots in your front door, so especially if you don’t actually bring your mail inside your home, a thief can get it before you do.

Lift credit card numbers from your credit card or bank statement

Four ways an identity thief’s actions can show up on your credit report and lower your score:

Late payments that were never late before. 2. Credit accounts you never opened. 3. Credit accounts you opened, but that are now delinquent. (Make sure to check your credit report for any accounts you didn’t open.) 4. Credit accounts you once had, but don’t any longer.

Why the low credit score? An identity thief could rack up a ton of debt in your name, even while you’re not making payments on your own debt, or paying your own credit accounts on time. Not only would that be yours and the thief’s debt accumulation on your report, but it would also be a big dip in your credit score. I’ve heard from a number of identity theft victims whose credit score has taken a huge hit as a result of identity theft. And that’s not the end of it. It may not be easy to rebuild your credit score after identity theft.

What You Should Be Doing

If you have been a victim of identity theft, it’s important that you take the right kind of steps to prevent yourself from becoming further victimized.

Here’s what you should do with your credit score:

Understand the actual damage of identity theft …

If your identity has been stolen, you need to take action immediately. The information that has been stolen includes your name, address, Social Security number, and a host of other personal information.

This information can be used to take out a bank loan, make charges to your credit, to apply for a credit card, or to purchase anything using your name.

Typically, the first thing identity thieves do is do a hard inquiry on your credit report, causing your credit score to fall. It’s important that you take action quickly.

First, protect your identity as much as you can.

Most identity thefts result from simple mistakes. Consistent vigilance can prevent problems.

Most of the time, identity thieves infect computers and steal identities with malicious software. However, sometimes thieves get the information they need to impersonate you with old fashioned social engineering techniques.

The best defense against identity theft is to protect your personal information from falling into the wrong hands. First, make a copy of your Social Security card. It’s easy to carry and keep separately from your card. Next, safeguard your bank account numbers, credit cards, and other identification information.

Super-imposing your information over someone else’s face may be used as a last resort but it’s an illegal offense.

Second, check your credit reports often.

If you’ve been a victim of identity theft, you should check your credit reports once a year to monitor the activity. Identity theft affects your credit report, which can lower your score – and raise the cost of some loans. But identity theft can be difficult to spot.

If someone has opened an account in your name, that activity may not show up until the lender pulls your credit report. Although credit bureaus are legally required to share your credit reports with you each year, your bank, department store or utility company may only pull your credit report when you apply for a new account. They may also pull your report before starting a new service or giving you a bigger credit limit.

Checking your own credit reports is important, but even that may not catch all identity theft. Some identity theft is not reported to the credit bureaus. So you also need to check with your creditors directly. Take a look at your credit card bills, bank statements, credit report, and any other financial statements to check for unauthorized activity.

Looking for the names, account numbers, and addresses of your creditors can help.