How Identity Theft Affects Your Credit History
Identity theft is one of the most worrisome of all threats you may face when it comes to your financial health. It is very real and is something that anyone should assume would not happen to him or her. It can happen in various ways and it can affect you temporarily or wipe out your financial future. It is up to you, though, to protect against it.
Take action on Identity Theft through Life Lock or Equifax.
What Is Identity Theft?
Identity theft occurs when someone takes on your identity to make a purchase, or to steal from you or others. This is theft and it can happen to anyone. It generally occurs when a person or people take your name, address, social security number, financial account information or your credit card number and use it to better themselves without your permission. This theft is no different (and often times worse) than stealing your property.
Identity theft happens in various ways, including:
- Stealing a credit card and using it
- Taking your identity and using it to apply for loans or other credit cards
- Using your identity to apply for a job
- Taking your credit card information and selling it to others
- Using your identity when arrested
- Using your identity to get insurance, buy a home, get a car or anything else
All of these things can affect your credit score in numerous ways. Remember that a credit history is a detailed document that depicts how well you manage credit. When these mistakes are made on your credit report, it makes you look bad. It can make it look like you are using credit poorly, missing payments or even simply not paying your debts. How can it affect your credit history?
Here is an example of how this could affect your credit history, and how rapidly it can spin out of control.
- You hand over your credit card to a waiter. He takes it back to a service center, swipes it for the payment, but also swipes it through a reading device. That device gathers your information.
- He goes home and uses the information on the device to make purchases using your card, usually over the Internet.
- He sells that information to someone else who can also use it to cause problems for you.
- At the same time, he is able to use the information to gather your personal information. He can get your name, address and even your Social Security number in some cases.
- He can open new accounts under your name but with his address. You have no idea this is happening and it all can happen within one day.
Some of the extreme cases of identity theft are when individuals take on your persona and pretend to be you. They may work under your name, collect benefits under your name, buy a home and live a totally new life with your name and Social Security number. They may do this because they cannot use their own such as if they are an illegal alien or if they are a felon on the loose.
How does this affect your credit score? You will see your credit score drop because:
- You have too many debts
- You do not pay your bills on time
- You have numerous accounts opening at the same time
- You have run up your credit limits
- You have obtained loans that are high risk
All of this affects your credit score negatively. Identity theft can create a mess with your credit history and often times it takes years to unravel it all.
Getting Out of Identity Theft
When you are facing identity theft like this, the process of repairing your credit is very difficult. The problem is, you have to prove to your lenders, the policy and the credit bureaus that you did not make those charges and that you do not need to be held responsible. However, with the growing number of cases occurring, police and lenders are all too familiar with the risks that they take by providing credit. Many of them will work with you.
Here are a few steps to take to dig your way out of such a problem.
- Step one is to simply stop all accounts that have a risk in place. Contact those lenders and report that you are not making the charges. Those lenders will immediately close and cancel those accounts.
- Next, contact the police. In some cases, lenders will want you to do this right away or they may do so themselves. They want to get their money back if possible.
- Work on credit repair next. Contact each of your credit bureaus and provide a copy of the police report to the agencies. Express what happened and what accounts in detail were affected.
- Get a copy of your credit report for free, and find errors. Report those as disputes and get them removed. This is by far the most important thing to do to preserve your credit long term, but you will need to prove you did not make the charges.
If there are lenders on the account that you did not obtain, it is a good idea for you to contact each one of them and report or dispute the charges. You can ask for the documentation that the applicant provided to the agency and ask how they verified this. Chances are good the police will work with you through this process, too.
It is always a good idea to know what is on your credit report because identity theft like this can happen to anyone at any time. Individuals will find a wide range of events affecting them – from a lost credit card to numerous accounts that they did not open. However, with the help of the police, and your lenders, you will be well on your way to rebuilding your credit. It can take time, and a lot of hard work to get there, but remember that your credit file is always changing. It can be overcome.