Credit Education

03. Aug, 2016

Identity Theft And Your Credit Score – Overview

The financial and emotional damage identify theft causes runs deep. Anyone who uses credit cards, ATMs, or bank websites takes a certain risk. There is no lack of skilled identity thieves looking to steal PIN numbers, website login codes, and other data for illicit access to other people’s money. Once they breach someone’s financial security safeguards, they can easily raid the victim’s bank account and open new credit lines in their name. These criminals even hide their illegal activities behind identities they steal from innocent victims. Theft victims might end up associated with crimes committed in their name without their knowledge!

Be Alert During All Electronic Financial Actions
The scale of illicit gains encourages thieves to devise more sophisticated identity theft methods. A recent news story, covered by BBC, describes how a team of thieves got to see the PIN number of an elderly widow as she withdrew cash from an ATM. They went on to steal her entire life savings of $30,000. Criminal gangs sometimes discreetly place cameras where they can film the codes entered at cash dispensing points. These incidents occur with an increasing frequency, because identify theft seems to offer relatively easy criminal pickings.

How Credit Scores are Set
The three major American credit bureaus are Equifax, Experian, and TransUnion. They receive information about each individual’s credit history from banks, credit card companies, and other financial institutions. They draw on this data to compile reports of each person’s credit history over a certain period. These reports show how much available credit is used and how well payment schedules are honored. Based on this picture of financial performance, three digit credit scores are assigned. The credit report gives the detailed picture, while the credit score offers an instant financial reliability measurement. .  

How Identify Theft Affects Credit Scores
Credit scores are one of the areas where identity thieves cause a great deal of harm. The longer the victim remains unaware of identity theft, the more severe damage will be. It often takes a long time and much hassle to undo the effects.

Consider the case of a responsible individual with a good credit score. Suddenly, their credit card spending rises dramatically. In contrast to their previous sound financial behavior, they seem to have become wild spendthrifts. As their account empties and payments are missed, their profile changes from a good credit risk to a very bad risk. A dramatic fall in their credit score eventually makes it much harder to get new loans on easy terms. Taking out a mortgage, buying a new car, financing a holiday, and many other financial transactions become more difficult.

If someone starts off well-funded and with an excellent credit rating, the full impact of the identity thief’s spending may take immediate effect. A person with poor credit won’t need to wait long for financial blows to begin. These credit score problems might be the tip of the iceberg. Failure to quickly identify and report identity theft may involve the victim in legal entanglements. The creditors naturally go after the person whose details appear on the credit card used. It might take some convincing to prove that the card owner is a theft victim rather than a criminal.

Take Active Steps to Prevent Identity Theft
There is no need to keep looking over your shoulder at every ATM withdrawal or credit card transaction, but sensible precautions are in order. These include regularly checking credit reports, setting up bank account alerts, and avoiding carrying more credit cards than needed. Remember to promptly report suspicious transactions to banks and credit card companies.

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