It’s a very common scenario: You get an email from your bank, requesting you click a link to update your account security. Next thing you know, you’re entering your name, address – possibly even your current password and social security number. The problem is, the link redirected you to a fraudulent website mimicking the look and feel of your bank’s real website. And now the bad guys have your data – and can apply for credit in your name with no intention of ever paying it back.
Phishing attacks like these are one of the most common methods used to steal your information and your money. But it’s not the only way. Data breaches are on the rise, in which businesses already in possession of your personal information are hacked and the data sold on the dark web. Once identity theft occurs, it can have a significant impact on your credit and finances, often with long-lasting effects. What follows are some of the biggest impacts identity theft fraud can have on your life.
Stolen Money & More Debt
Depending on what thieves gain access to, they may make purchases on your current credit cards and/or drain your bank accounts. Depending on the financial institutions you use and your notification settings for each, these types of incidents are usually the most quickly discovered.
More insidious is when identity thieves use all or some of your data to open new credit or loan accounts – and then let the unpaid debts pile up. Many consumers don’t notice anything is amiss until delinquent accounts begin showing up on their credit reports.
Identity theft fraud is especially difficult to detect when fake details (a made-up name, birthdate) are paired with the social security number of someone unlikely to be monitoring their credit – such as a child, the elderly, or individuals who are homeless. The lack of a full identity match can significantly slow down the discovery and resolution of the fraud. Meanwhile, victims whose SSNs are used in this manner may be pursued for debts they did not incur.
Lower Credit Score
Delinquent accounts, credit inquiries required to open new lines of credit, and opening a lot of new accounts in a short period of time can all lower your credit score. The repercussions of a low credit score are immense. A lower credit score can negatively impact your ability to obtain loans, secure housing, or find employment.
Credit Denials, Higher Interest Rates & Insurance Costs
Most notably, a low credit score can lead to the unexpected denial of credit or a loan. Or, if you’re able to secure credit, the interest rate you’ll get may be significantly higher than before. Your insurance premiums will likely increase – insurers check your credit score, and you may be required to make larger security deposits for utilities or rental properties.
Restrict Your Employment Opportunities
Depending on the type of job you’re applying for, you could be denied employment based on a low credit score or otherwise problematic credit report. Employers who check credit may do so to identify how much debt you carry, or if you are regularly delinquent on payments.
Impact a Child’s Financial Aid for College
If your child’s social security number is targeted by cybercriminals, the identity theft and subsequent fraud may go undetected for years. And it can result in numerous complications when your child is older, such as being denied financial aid for college. This occurs when the fraudulent activity “attaches” an income to a child’s SSN, which may disqualify your child for financial assistance.
Stolen Tax Refunds
Identity thieves may also commit tax fraud, claiming and receiving your tax refund before you have a chance to file your return to claim it yourself.
Disruption of Long-Term Financial Goals
Identity theft fraud can disrupt your long-term financial planning, affecting your ability to save for retirement, buy a home, or finance education. Spending time and money to repair your credit and recover from these financial losses can divert hard-earned funds away from these important goals.
To rectify the situation after identity theft fraud involves disputing fraudulent accounts with the credit bureaus, closing any unauthorized accounts, reporting the crime to authorities, and working with creditors to clear your name. The process is incredibly burdensome and can be time-consuming and costly.
Protect Yourself Against Identity Theft Fraud
Be sure to follow all the usual advice to avoid falling prey to identity thieves. This includes utilizing the following precautions:
- Be wary of clicking on links or providing sensitive information to anyone over the phone, online, or via email or text – especially when you didn’t initiate the contact.
- Use 2-factor authentication wherever possible.
- Monitor your credit reports from the three major credit bureaus – and consider putting a credit freeze or fraud alert on each.
When Prevention Is Not Enough
Because identity thieves are notoriously industrious when it comes to finding new ways to steal your money, your best bet is to have backup protection, in the form of identity theft coverage.
This specialized insurance product can help you restore your credit after you’ve been a victim of identity theft fraud. With it, you’ll receive:
- A thorough damage assessment
- Access to a consumer fraud specialist to work with your creditors
- Up to $25,000 in reimbursed expenses associated with restoring your credit
- Managed monitoring and repair of credit to its pre-fraud condition
At Edison Insurance Company, we understand just how unsettling, stressful, and inconvenient it can be to try to repair your credit after identity theft fraud. Its why we offer this add-on coverage to your home or condo insurance policy with us. Ask your Edison agent about identity theft protection today. To explore your home insurance options with us, get a quote now.
