Identity thieves are out there, and they’re often just waiting for the right moment to pounce. So when it comes to your personal information, a lapse in protection can have severe consequences.
Identity theft can wreak havoc on your credit, and once your information is compromised you may struggle to undo the damage. That’s why it’s important to stay proactive, and avoid the pitfalls of fraud. Consider these three ways identity theft harms your credit and how to avoid it.
1. Existing accounts
One of the most common consequences of identity theft is a compromised existing account, such as your credit card, debit number or your banking information. It’s bad enough if they get your credit card information, where they could easily run up your debt and harm your credit utilization, which accounts for 30 percent of your credit score. If they get your banking information, they could also drain your accounts, and debit card fraud can be harder to fight than credit card fraud.
2. New accounts
If an identity thief gets the right information, like your name and social security number, they could potentially apply for new accounts in your name. This would result in hard inquiries on your credit report, which represents 10 percent of your credit score and can ding it by several points. While the effects of one hard inquiry are fairly marginal, multiple inquiries can send your score plummeting.
The new lines of credit will also show up on your credit report. Several new accounts could actually shorten the length of your credit history, which accounts for 15 percent of your credit score.
Finally, if the thief gets new cards under your name they could secretly run up substantial debt.
It’s unlikely that an identity thief is going to steal from you and then help you pay back the debt. The debt charged to your account will be attributed to you and you’ll be the one left on the hook. Payment history accounts for 35 percent of your credit score, and any late payments will dramatically harm it. An excellent credit score could drop by up to 100 points as a result of a 30-day late payment.
How to protect yourself from identity theft
While identity theft is a serious concern, the damage isn’t irreparable. Here’s what you should do if you’ve been impacted by identity theft:
- Call the police – Identity theft is a serious crime and should be reported. The criminal could be prosecuted, and reporting the crime will help back up your dispute claims.
- Initiate a credit dispute – The Fair Credit Reporting Act states that fraudulent credit activities must be blocked from your credit history. Make sure to check your credit report and dispute any fraudulent activities.
- Freeze your credit – A credit freeze will prohibit an identity thief from opening new accounts in your name, and it won’t affect your credit score.
- Consult a credit lawyer or credit repair expert – If your credit has sustained serious damage as a result of identity theft, don’t try to tackle the issue on your own. Experts at Lexington Law can provide legal and credit repair advice to help you fix your credit in the wake of identity theft.
Still, it’s best to be proactive when it comes to protecting your credit. Keep a close guard over your personal information to help keep identity thieves at bay.