Identity Theft and Your Credit: A Guide to Protecting Your Score
Identity theft can deliver a serious blow to your finances, with the potential to damage your credit score significantly. It’s imperative to spot the signs early and take action immediately. This guide explains how identity theft works, its impact on your credit, and steps you can take to protect yourself.
Identity theft happens when someone gets a hold of your Social Security number (SSN) and other personal info. They can then open credit card accounts or apply for loans in your name.
If these fraudsters get approved, they often run up debt without making payments, leaving you with a credit report filled with late payments and defaults. Because payment history and the amount of debt you owe make up a huge chunk of your credit score, multiple late payments or maxed-out credit cards can plummet your score to “poor”.
Protecting Your Credit
Even though identity theft is a serious threat, you can take steps to reduce the damage.
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Monitor Your Credit Report: Keep an eye on your credit report regularly, ideally every month. You can get free weekly reports from all three major credit bureaus (Experian, Equifax, and Transunion) at AnnualCreditReport.com. While they won’t show your score, you can check the accounts and inquiries that show up under your name. If you find anything suspicious, dispute it with the credit bureaus right away. Mistakes happen, but multiple new accounts you didn’t open could be a sign of ID theft.
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Consider Credit Monitoring/Identity Theft Protection: These services will alert you if your info has been compromised and keep you posted about any changes to your credit report. Check if your credit card provider (like American Express, Chase, or Discover) offers free credit monitoring as a perk.
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Freeze Your Credit or Place a Fraud Alert: If you’ve been a victim of identity theft or your info was leaked in a data breach, a credit freeze or fraud alert can help.
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A credit freeze limits third-party access to your credit history. If someone tries to open a new credit line while your credit is frozen, the lender can’t see your history and will deny the application. You have to freeze your credit individually with each credit bureau by creating a free account on their websites.
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A fraud alert is used once you know you’re a victim of ID theft. You only need to contact one credit bureau, and they’ll notify the others. If a bureau gets a credit request with a fraud alert, the lender will have to take extra steps to confirm the applicant’s identity, like contacting you directly.
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Repair Any Damage: If your credit has already been harmed by fraud, take immediate action. Dispute any incorrect items with credit bureaus and the lenders themselves. You’ll want to have proof of the identity theft to make this easier. If your credit is severely damaged, a credit repair company could help by disputing incorrect or unfairly reported info for you.
