By now you have probably heard that having a bad credit score can wreck a whole lot of havoc on your finances – including your inability to acquire a loan. You also may be aware of certain payment behaviours and account activity on your part that can cause your credit score to decline. There is also one major occurrence that can lead to a lower score – that of course being, Identify Theft.
There are many instances where identity theft can severely injure your credit score and you may not even know it. Being diligent and being aware of some of the most common ways that identity theft can occur and impact your credit is extremely important and can help you correct these threats before they cause too much damage. Here are 4 ways that identity theft can injure your credit score.
1) High Balances on Existing Accounts
Perhaps one of the most common identity theft instances, involves the misuse of your existing credit card account. Any sudden increase in the balance on your credit card may go undetected on you part, however it may be a case of identity theft. Regardless of the reason, when your credit card balance reaches closer and closer to your credit card limited, your credit score can also decline. Therefore, it is a good idea to closely monitor your balance and review any charges that you do not recognize as your own and then you can try to correct the problem.
2) Opening New Accounts
Another way identity thieves can tamper with your account is to use your personal details to open a new account in your name. As they go on to use this account and since it registered under your identity this will also impact your credit score. Even in the event that this new account is managed properly and paid on time, for example – it can still diminish your score. That being said, it is highly common for identity thieves to mismanage this account and run up the balance, so in this case it will most certainly impact your credit in a negative manner.
3) Regular Late Payments
Your credit score can also bottom out as a result of a new account being neglected and going unpaid by the fraudulent user. A typical pattern is for the scamming party to open the account in your name, start out by making regular payments and then stop paying the monthly tab. With this being a regular pattern – it is even more likely that you won’t be remotely aware of what has happened until it is too far gone and your score has experienced a crash of sorts. In this case, you will want to continue to track your account transactions even more closely to make sure nothing shady sneaks through undetected.
4) Multiple Account Inquiries
Lastly, each and every time the identity thief tries to open a new account – or even inquires about opening a new account, this is recorded as a ‘hard inquiry’ on the victim’s account – who’s name they have stolen. The more times the scam artist – or artists try to use your name to open an account this will cause the credit reporters to sit up and take note. However, since they are not mind-readers they won’t know that it isn’t you making these account requests. What they will see however, is that you are trying to access a lot of different credit sources and this can be viewed as a red flag that you may be having financial difficulties. As a result, this will go onto your credit report and again cause your score to take another dive. Making sure you have taken steps prior to this to watch for misuse of your accounts and in the case of account ‘hard inquires’ or accounts being opened in your name – you should look to your credit report on a more frequent basis. If, for example your credit score has gone down and you don’t know why, it is best to check on it and make sure as it is either something you have done or if it is a case of identity theft.
Continuing to monitor suspicious activity in combination with knowing where your credit score stands based on your own account actions can help you to do your best to prevent this from leading your credit score down a bad path – a path that can take a long time to come back from. In the end, in the event you do think you have already succumb to identity theft – and your credit score has been affected you can contact one of the Canadian Credit Reporting Bureaus – TransUnion Canada or Equifax Canada to learn what specific steps you will need to take to correct these misfortunes.