How Identity Theft Can Affect Your Credit
Identity theft is an all too common problem in today’s digital age.
If your identity is ever stolen, it is important to clear up the problem as soon as possible, as the person fraudulently using your accounts can cause real damage to your credit score.
There are three different ways identity theft can negatively impact your credit.
1. Maxing out your credit limits.
If someone gains access to one of your credit cards, chances are they are going to start spending on your account.
This will push your card closer to its credit limit, which can make a dent against your credit score.
Roughly 30 percent of your score comes from your credit utilization rate, the ratio of your outstanding debt to your total credit limit.
If an identity thief maxes out some of your cards, you are going to lose points in this category.
2. Launching new accounts.
Each time the thief applies for a new account, the lender will make an inquiry into your credit score. Each inquiry drags down your score by a little bit.
If the thief applies for many new accounts under your name, these small hits could add up to real damage.
“An identify thief may also use
your personal information.”
3. Late payments.
Your payment history is the most important part of your credit score. That is why you work so hard to pay all your bills on time.
When identity thieves open accounts under your name, they are not concerned with making the payments.
This shows up as many missed payments on your credit report and can be very damaging for your score.
4. Long-term effects should be minimal.
The credit damage from identity theft should not last forever.
Once you identify the problem and get the issue fixed, the rating agencies will remove all of the negative information and adjust your score back to where it should be.
While this investigation is going on, you should avoid applying for new loans or credit cards because you would be applying with a damaged score.
This means you would not get the terms you deserve.
Identity theft causes real financial issues, which is why you need to discover problems as soon as possible.
Use these credit issues as motivation to check your credit report on a regular basis and keep identity thieves at bay.