When an individual gains access to your personal information, the impact can extend far beyond immediate financial losses. The individual may open new credit accounts, make purchases, or even take out loans in your name. These frauds can affect your credit score negatively in many aspects. Therefore, it is essential to seek ways to protect your credit score.
But what exactly is the impact of identity theft on your credit score? The sections below discuss this in detail.
- Increased Credit Utilization: When thieves gain access to your information, they will deplete your available credit or take out new accounts in your name. This results in an increase in your credit utilization ratio and a decrease in your credit score.
- Unexpected changes to your credit report: Anything from an unfamiliar account to the wrong balance on your credit report may be a telltale sign of unauthorized access to your credit information. Such discrepancies will hurt your credit score and require urgent attention.
- Unpaid Bills: An identity thief typically leaves bills that are listed in the victim’s name, leading to late payments. These late payments can cause a severe deduction of your credit score and will remain on your report for up to seven years.
- New Fraudulent Accounts: One of the ways to lower the average age of your credit history is to open false accounts in your name. The shorter your credit history length, the lower your credit score will be, since a longer history can better support a high score.
Steps to Take if You Suspect Identity Theft
Start by requesting a free copy of your credit report. This is your right under federal law. You can get a report from each bureau once a year at no cost.
Examine each report thoroughly for any unfamiliar accounts, unauthorized inquiries, or errors. This review helps identify signs of identity theft and provides a starting point for further action.
Place a Fraud Alert on Your Credit Reports
Contact one of the three major credit bureaus to place a fraud alert on your credit reports. You only need to reach out to one bureau; they will notify the other two. A fraud alert instructs creditors to take extra steps to verify your identity before issuing new credit in your name, adding a layer of protection against the opening of unauthorized accounts.
Freeze Your Credit
Request a credit freeze. A credit freeze restricts access to your credit report for new creditors, making it difficult for identity thieves to open new accounts. By freezing your credit, you prevent unauthorized access to your credit file, thereby blocking new credit applications from being processed while the freeze is active.
Report Identity Theft
File a report with the Federal Trade Commission (FTC). The site will guide you through creating an Identity Theft Report and provide a recovery plan tailored to your situation. The FTC report is crucial for disputing fraudulent accounts and working with creditors to clear your name. It serves as official documentation of the theft and helps streamline the recovery process.
Notify Your Financial Institutions
Contact your bank, credit card companies, and any other financial institutions where you hold accounts. Report the fraudulent activity and request to close or freeze any accounts that have been affected. Informing these institutions helps prevent further unauthorized transactions and facilitates the resolution of any issues with compromised accounts.
File a Police Report
Go to your local police department to file a report about the identity theft. Bring your FTC Identity Theft Report and any relevant evidence you have. A police report can be crucial for disputing fraudulent charges and proving to creditors that a crime has occurred. It also provides official documentation that may be required for further actions.
Correct Errors on Your Credit Report
Dispute any inaccuracies you find on your credit reports with the respective credit bureaus. Provide supporting documentation to back up your claims. Addressing and correcting errors is essential to restoring your credit score and ensuring that your credit history reflects accurate information. This step is crucial for maintaining a healthy credit profile.
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