According to the 2018 Identity Fraud Study conducted by Javelin Strategy & Research, there were 16.7 million cases of identity theft in 2017, which is a “record high” according to the report. The study also says fraudsters have been able to reel in more and more victims despite the efforts to combat identity fraud. Last, identity theft has led to the amount of money stolen to rise to $16.8 billion.
And if you think the odds are in your favor, think again. In 2017, approximately 1 in 15 people were victims of identity theft. There’s a chance you’ll be affected by identity theft in your life, and when it happens, it can ruin your credit and make your life a living nightmare.
In this article, we look at how identity theft ruins credit, how to fix your credit from it and what you can do to protect yourself.
How Identity Theft Happens
In a nutshell, identity theft happens when a thief gains access to your personal information, such as your name, social security number, bank account information, or credit cards. Once they have access to this information, they can open lines of credit in your name, make purchases on compromised credit cards, and even claim your tax refund. The way people do this varies on a case by case basis.
Sometimes, thieves can go through your trash to piece together all the information they need to steal your identity. Sometimes they steal your mail. In other cases, thieves use a tactic called phishing, which is a technique in which they send you an email that looks like it’s from your bank or other trusted institutions asking you to update your username and password, but in reality, it’s a way to get access to that information.
How Identity Theft Ruins Your Credit
The primary way in which thieves ruin your credit score is by making purchases in your name and then not paying for them. If you already have less than perfect credit, this damage might take years to fix, and might make it difficult or impossible to get credit. Even when the theft is found and reported to the proper credit agencies, victims still face an uphill battle to repair their credit.
When a thief makes purchases in your name and then doesn’t pay, not only do the late payments show up as a negative on your credit report, the account will surely go to a collection agency, which is another ding. It’s not uncommon for people — even with good credit — to lose 100 points or more when they’ve become victims of identity theft. Lastly, the victim is usually not aware that someone has stolen their identity until it’s too late. When these fraudulent debts go unpaid for a specific period, the creditor may sue the victim.
You can fight this in court, but that involves legal fees and a tremendous amount of time.
How To Fix The Problem
The first course of action is to contact your credit card companies and your bank the minute you suspect someone has stolen your identity. Tell them what happened and begin the process of working towards a solution.
The next step is to close the accounts that have been opened in your name and have cards reissued for any accounts you believe to be compromised.
Another step to take is to put a freeze on your credit by using what’s called a fraud alert. This alert lasts for 90 days and it forces lenders to take additional steps to verify your identity before they’ll let you open a new account. If the damage is more widespread, you can ask for a credit freeze, which makes it so no one can access your credit report, which means no one can open any new accounts in your name.
Also, it’s essential you be vigilant and dispute all suspicious charges with your creditors.
Sometimes, the damage to your credit may be so severe and complex, that you need to use the credit repair services of a specialized agency that helps repair credit that’s been damaged due to identity theft. There are many online companies you can choose from or you can opt for a law firm that specializes in this work. Getting the help of an agency might be the way to go because it takes the hassle and burden off your shoulders and can often get better results than if you were to go it alone.
How To Protect Yourself
To better guard against identity theft, here are a few things that you can do to reduce your risk.
- Use Strong Passwords For Online Banking
- Avoid Clicking Links Sent To You Via Email That Ask for Personal Information
- Monitor Your Credit Report
- Shred Personal Documents Before Throwing Away
- Never Give Out Personal Information Over the Phone