How To Protect Your Credit Score When You Are An Identity Theft Victim

Identity theft is a frightening crime that continues to dominate the headlines. Barely a month goes by without another major breach in the news. According to TransUnion, 19 people fall victim to identity theft every minute. There are three big risks that impact American consumers:

1. One of your existing credit or debit cards are compromised. The criminals can run up expenses on your credit card or drain your checking and savings accounts.
2. Your identity is stolen, including your Social Security Number. In this scenario, the fraudster can open new accounts in your name, and run up credit card debt. Or they might even use your Social Security Number for medical debt.
3. The fraudster’s actions can crush your credit score. In a typical identity theft, a fraudster would apply for new credit, max out the credit card and fail to make a payment. Every credit inquiry could take 10 - 20 points off your score. The increase in credit card debt will hurt your score even more. And the missed payments will have the biggest impact. You could easily lose more than 100 points as a results of a fraudster’s activities until you clean up your report.

Fixing identity theft is a painful process, with the average case requiring more than 30 hours of time and effort to repair. Although your credit score will ultimately recover in the long run, it can take time to get everything on your credit report fixed. Identity theft can be particularly painful if you were just about to apply for a mortgage, auto loan or other form of credit and no longer qualify because of the hit to your score. However painful, it is important to keep working until all of the incorrect items have been removed from your report. Otherwise, your score could suffer needlessly for years.

If you think you are a victim, take the following steps to get your situation resolved.

Make Sure You Know If You Have Been A Victim

It is very easy to have your account or identity stolen and not even know it. To make sure your accounts are not stolen, set up regular transaction alerts. I have set up alerts with my credit card company so that I receive a text message every time a transaction takes place. That means the first time an unauthorized transaction happens, I will know right away and will be able to call and report it. Most credit card companies offer alerts that can be sent to you by email or text.

To ensure that your identity has not been stolen, you would need to sign up for credit monitoring, and review your credit report regularly. You can sign up for free credit monitoring at Credit Karma. You would be notified any time someone applies for a new account or opens a new account with your Social Security Number and identity.

Although credit monitoring is helpful, there are still some blind spots. If someone uses your Social Security Number to open a bank account, you would only find out by reviewing your ChexSystems report. You can receive a free report once a year here.

If Your Account, But Not Your Identity, Has Been Stolen

If only your account has been stolen, the process for recovery is much easier and quicker. You just need to call the companies where you know the fraud occurred. For example, if your Citibank credit card was stolen, you just need to call Citibank directly and report the fraud. Your credit card or debit card issuer should issue you a new account number and remove fraudulent charges from your account. Your bank is also responsible for amending your credit report. Just make sure you reach out to your bank as soon as the fraud occurs. If you wait, you could lose some of your legal protections.

If Your Identity Has Been Stolen

If the fraudster is opening new accounts, your identity (including your Social Security Number) has likely been stolen. You will need to take the following steps immediately:

• Review an updated version of your credit report. You can download a free copy of all three reports at www.annualcreditreport.com. Make a note of all accounts that have been opened fraudulently.
• Call the fraud departments of the banks where the fraudulent accounts have been opened. Tell them that your identity has been stolen, and that they need to freeze or close the accounts. Keep records of all of your calls.
• On your existing accounts, change all passwords and PINs.
• Consider a fraud alert or freeze on your credit reports. With an alert, there will be a flag put on your report for at least 90 days. Creditors will see the flag, and are supposed to add extra scrutiny before approving any application for credit. However, it is still possible that a new account could be opened. A credit freeze makes it impossible for creditors to obtain your credit report. You will be given a PIN code, and can turn off the freeze when you want to apply for credit. Fraud alerts are free, and a freeze usually has a fee. You can apply for the alert or freeze at the credit reporting agencies directly:
  • Equifax
  • Experian
  • TransUnion
• Report your identity theft to the FTC online. By doing this, you will have created an Identity Theft Affidavit.
• File a report with your local police department. A combination of your police report and Identity Theft Affidavit guarantees a number rights, including the right to stop a debt collector from contacting you and the right to dispute inaccurate information on your credit report.

Once you receive your police report and affidavit, you should then take the following steps:

• Call companies where accounts have been opened fraudulently and order them to close the account, if they haven't already taken that action.
• Call any collection agency that has registered a negative item on your report, and order them to remove it.
• Correct your credit report online by filing disputes with all three credit reporting agencies. MagnifyMoney (my website) has created a step-by-step guide on how to dispute credit reports online.

If You Have Difficulties, Turn To The CFPB

The process to fix your credit will be painful. You will need to deal with the call centers of large banks, credit reporting agencies, and government agencies. It is likely that you may get stuck. Just make sure that you keep a written record of all of your actions. And, if you find that you do get stuck, do not be afraid to reach out to the CFPB to complain.

You can do that online, and you will likely be surprised at how helpful the complaint service of the CFPB can be. Very close friends of mine have used the CFPB complaint process with great success.

Remain Vigilant

The likelihood of account or identity theft continues to increase. Whether or not you have already been hit by a fraudster, you need to remain vigilant in the future. That means setting up alerts on your existing accounts and reporting any suspicious behavior. That means setting up credit monitoring, and taking action the minute you see a suspicious account created. And that means reviewing a copy of your ChexSystems report every year.

Unfortunately, we will be able to depend less on banks and will have to rely more on ourselves to detect and take action against fraud. But the good news is that many tools have been created to help us do just that. Now it is up to us to use them.