Identity theft is on the rise. Each year millions of Americans are the victims of thieves who do serious damage to their financial life. But how does identity theft affect your credit? Let’s take a closer look:
Hard Inquiries
Even if an identity thief never successfully opens an account in your name, the hard inquiries they make on your credit report can result in serious consequences. Typically, a hard inquiry from a lender only brings down your credit score a few points, but multiple inquiries from various types of lenders in a short period of time can bring your score down 50 or more points.
High Credit Utilization
If an identity thief has gotten a hold of your existing credit card accounts, the debt they create could seriously impact your credit score. By maxing out your existing credit cards, identity thieves increase your credit utilization and make it appear that you’re stressed for cash. Until you have the charges reversed and your credit report corrected, you could see a serious drop in your credit score.
New Accounts
For borrowers who don’t regularly monitor their credit report, new accounts created by identity thieves will make it seem like you’re currently on the hunt for credit. As a result, your credit score may drop significantly, especially if multiple accounts are opened at the same time.
Late Payments
Sometimes identity thieves will open accounts and pay the minimum for the first few months, but eventually they just stop making payments altogether. It’s these late payments that can have the greatest impact on your credit. Even one late payment can reduce a high credit score by as much as 100 points. If you aren’t monitoring your credit report, the unauthorized account can go from simply delinquent to default without you ever knowing it.
The best defense you have against identity thieves is to keep a constant eye on your credit report by using a reputable credit monitoring service.
“The best defense you have against identity thieves is to keep a constant eye on your credit report by using a reputable credit monitoring service.”
