How Do You “Fix” Identity Theft?: A Guide to Monitoring Your Credit & Reporting Fraud
If your identity is compromised, you may feel violated and frustrated. Not only is identity theft upsetting, it may also have negative effects on your credit score and can hinder your ability to reach your financial goals.
This criminal act is more common than you’d think. During 2016, about 10% of the population 16 and older experienced identity theft. While only about 12% of these victims experienced losses of more than one dollar, their credit scores could have easily been affected. Whether you’ve been the victim of this criminal act yourself or you’re being proactive in preventing identity theft, review this guide so you can learn ways to avoid this crime.
Table of Contents
- 1 How Will Identity Theft Affect Your Credit?
- 2 What to Do if Your Identity Has Been Compromised
- 3 How to Reduce Your Risk of Identity Theft
How Will Identity Theft Affect Your Credit?
When a thief gets ahold of your identity, they can do a number of things to affect your credit score, such as using your current credit cards or opening new accounts in your name. The extent to which your credit score will drop from identity theft depends on what the criminal does with your identity once it’s stolen.
Unfortunately, if you’ve been a responsible spender with a good or exceptional credit score, you may be hit the hardest. When negative actions are recorded in your credit history and they’re out of character for you, it’s assumed that you’ll no longer be responsible. Your credit score can drop dramatically if your credit utilization score rises or payments are skipped on a new account.
Compromised Credit and Debit Cards
When your identity has been stolen, the criminal may gain access to your existing credit and debit card accounts. They can rack up charges on these cards, leading to a higher credit utilization score.
If the criminals make subtle and small charges on your accounts or use accounts you don’t check regularly, you may not even notice. These criminals may continue increasing delinquent credit card debt in your name for years, bringing down your credit score.
Identity thieves may also open new bank accounts, credit cards, or loans in your name once they’ve stolen your identity. Since many of these financial tools offer online applications, the thief simply needs to provide your identification information to enroll. Once approved, the criminal can use the account to rack up a balance without paying a cent.
For example, say an identity thief opened two credit cards in your name and maxed out both credit limits at $5,000. Now your credit utilization rate has increased by $10,000. No payments are made to the credit card company, so late and missed payments are also added to your report. Your score can decrease quickly if you don’t notice these erroneous claims and report them.
Does Reporting Fraud Hurt Your Credit Score?
Report fraud on your credit report as soon as you notice it. According to Experian, one of the three major credit bureaus, “Adding a fraud security alert will not affect credit scores in any way.” When erroneous charges are disputed and taken off your report, it may even help to raise your credit score.
What to Do if Your Identity Has Been Compromised
It’s important to understand the signs of identity theft and review your credit report regularly to look for these signs. You’re entitled to one free credit report each year through one of the three main credit bureaus, Experian, Equifax, and Transunion. When reviewing your credit report, look out for:
- New accounts, such as credit cards or loans, you didn’t open.
- A high credit utilization rate if you haven’t borrowed money recently.
- A dramatic drop in your credit score without reason.
Any of these could be indications of identity theft and you’ll need to report it as soon as possible.
Report Identity Theft to Law Enforcement and Credit Bureaus
If you suspect identity theft, you must inform law enforcement as soon as possible. Provide a copy of your credit report and any other information that may help prove the crime or identify the criminal.
It’s also important to contact the three credit bureaus to dispute the errors on your report. In most cases, you’re required to dispute these errors in writing. Describe the erroneous items on your credit report and send your letter to:
- Experian: P.O. Box 4500, Allen, Texas 75013;
- Equifax: P.O. Box 740241, Atlanta, Georgia 30374;
- Transunion: P.O. Box 1000 Chester, Pennsylvania 19022.
If there are erroneous charges on your credit card or you notice a loan in your name that you didn’t request, contact the lender or credit card company immediately. You may need to provide the company with personal information, such as your Social Security number, so they can find and close your accounts.
How to Reduce Your Risk of Identity Theft
If you’ve ever been the victim of identity theft, you know the harmful effects it can cause to your financial well being. To prevent identity theft in the future, be proactive about protecting your identity.
Protect Your Personal and Account Information
Protecting your personal information both online and offline is the best way to avoid identity theft. To keep your sensitive information safe, be sure to:
- Guard personal data: Make callers identity themselves successfully before you provide personal information over the phone and don’t provide your personal information online unless you know a site is reputable.
- Encrypt your data: Use encryption for your emails and other data you store on your computer. This prevents it from being easily retrieved by hackers.
- Use security software: By installing and running security software, you can identify unwanted downloads or viruses on your computer that may take your information.
- Dispose of documents securely: If you have sensitive documents that include your personal information, consider using a professional service to dispose of them securely. Thieves can obtain these documents from receptacles and use them to steal your identity.
- Be careful about links: If you receive emails or messages that encourage you to click on links or download files, investigate first. When you click on links in these phishing emails, they may expose your computer to viruses or malware that extracts your personal data, including passwords.
Enroll in a Credit Monitoring Service
One of the best ways to prevent identity theft is by enrolling in a credit monitoring service. With this service, you pay a company to regularly monitor your credit and alert you if a new account is opened in your name or suspicious charges appear on your credit cards. Once notified, you can determine if the action is valid or needs to be reported.
Consider the following factors when shopping around for a credit monitoring company:
- Cost: Some credit monitoring services are free while others charge a monthly or annual fee. Make sure you understand the charges you’re responsible for with the company you choose.
- Services: Review the services included with the company and plan you choose. Some credit monitoring plans may only review your credit report while others will delve into your credit card statements and other financial resources.
- Credit bureaus: Credit monitoring services may only use your credit report from one bureau to check on your score and history. Find a service that monitors all three bureaus for added protection.
Identity theft is frustrating, negatively impacts your credit score, and may make it harder for you to achieve your financial goals. If you know how to spot identity theft and take the steps to protect yourself both online and offline, you can prevent this criminal act from destroying your financial future.
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