Guest article by Alayna Pehrson – Digital Marketing Strategist at Best Company
Identity theft is destructive, especially to a person’s credit score. According to identitytheft.info, approximately 15 million people in the United States experience identity theft each year. The number affected by identity theft crime is on the rise as new technology gets introduced. Hackers continue to find prime targets like those who fail to monitor their credit, use their credit for unsecured purchases, lose track of their social security number, physically lose their credit cards, or fall for phishing scams. Overall, there are multiple ways that identity theft criminals can get their hands on your credit information and your identity. Here’s how your credit can be affected when your information falls into the wrong hands:
High Credit Utilization
When identity thieves obtains your credit information, they will most likely affect your credit utilization rate by maxing out your credit limit. A high credit utilization rate not only significantly hurts your credit score, but also shows lenders that you are a financial risk. Identity theft criminals can ruin your responsible reputation and limit your future credit opportunities.
Identity theft criminals can open multiple lines of credit under your name. Although credit issuers may see this as a red flag and start rejecting applications for credit accounts, the person using your identity may have done major damage before that happens. Whenever a person applies for a new credit account, a hard inquiry occurs. Hard inquiries can negatively affect your credit score but aren’t usually a problem if you are applying for one new account at a time. However, if an identity theft criminal applies for multiple credit lines, multiple inquiries can lead to major damage to your credit score.
Paying your credit card bills on time is necessary if you want to maintain a good credit score. Although you may make your payments on time, the person who stole your identity most likely will not. Payment history makes up 35 percent of your overall credit score, so having a buildup of late payments can definitely lower your score. When an identity theft criminal abuses your credit card by making extreme purchases, not only does your credit score drop due to missed payments, but you’ll also have higher interest rates, accumulate late fees, and take a hit on your credit report.
According to ValuePenguin, the average American household debt is approximately $5,700 and 38.1 percent of households are in some sort of credit card debt. When it comes to identity theft, the average debt can be much more. For instance, identity theft criminals may try to take out loans or go into credit card debt using your name. Debt can harm your credit score and your chances of getting approved for things like loans or new credit cards as it shows a lack of responsibility.
What You Can Do
Although it may seem like identity theft is inescapable, there are some precautionary measures you can take to lessen your risk of becoming an identity theft victim. Some measures you can take include the following:
- make sure you secure important documents at home
- shred documents that have sensitive information on them before throwing them away
- frequently review your credit report
- check your bank statements
- be cautious about sharing personal information with others
- create strong passwords for online accounts
- install the latest anti-virus software on your computer
If your identity has been stolen and you are worried about how it might affect your credit score, first, report the theft to the police. Then, contact your financial institution and let them know your identity has been stolen. Next, change your passwords for your online accounts, obtain a copy of your credit report, and report the theft to the Federal Trade Commission’s Identitytheft.gov website. This site will help you develop a recovery plan. Consider hiring an identity theft protection service that will monitor your credit, alert you if there is fraudulent activity, and help you recover if your identity is stolen.