Identity theft has become a more serious issue in the current era of mass communications and computers, because of the increasing automation of transactions involving your personal details.
In addition to the old methods of digging through residential trash for snippets of credit card bills and identifying documents, identity thieves now can access the internet with passwords capture through social engineering and coaxing people to send such details to them.
As you might expect, the results of identity theft on your life can be fiscally and psychologically debilitating.
Destroying Your Credit History
One of the more insidious effects of identity theft is what it can do to your credit score in the future immediately following the initial discovery. Although most credit cards have robust rules in place forgiving you for any charges made in the event of identity theft, these can take a long time to kick in when there’s a lot of rectification to be done tracing the effects of the culprit’s actions.
Because the charges have been registering for some time before you become aware of the theft, these adverse actions accumulate on your credit file, and will take weeks or months to remove after the theft is ascertained. Anything important you might need to do during this transitional period, such as securing a home loan or a car loan at favorable rates, will have to wait.
One way to combat this possibility is to monitor your credit card accounts regularly, and seek to rectify any suspicious charges – no matter how small – immediately. After all, almost 6 million households were victims of credit card fraud in 2010, in which the more egregious violations might have been avoided with more regular monitoring of credit accounts.
Another viable option is the protection afforded by insurance, which can more quickly recoup any losses while your credit score is being readjusted.
Identity Thieves Make a False History on Your Credit File
In addition to increasing the credit utilization of your main account, which then drops your FICO score if you have too much credit used vs. credit available, identity thieves also pile up the late payment charges – which, of course, also drop your credit score eventually. Since you are usually unaware for quite some time that someone is masquerading around as you, the deleterious effects are able to pile up.
You know that for each inquiry that you make about opening up a new line of credit, or possibly increasing your current one, counts against your credit score after too many of them show up. Although infrequent requests don’t have an adverse effect; constant ones will eventually drive your FICO score down.
This so-called hard inquiry sends signals to loan and credit card companies that you aren’t very responsible when it comes to money managing, since you’re apparently shopping for credit.
Preparing for the eventuality of identity theft by investing in insurance can drastically minimize all resulting fiscal damage – and eventually reverse it altogether.
In short, the very first step you should take when you discover that your credit profile has been compromised is to alert all three credit reporting agencies and request that they place a hold on your account.
Then file an identity theft report and start going through your information to look for obvious changes and any open accounts that you don’t recall requesting. Identity theft is a rising crime, but there are options out there for your protection.