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The Hazardous Effects of Identity Theft on Credit Scores

By Sally Maison
Published: Friday, March 5th, 2010

Identity theft has always been quite a hassle, particularly in the credit card industry. More importantly, identity theft is not just one act of crime committed, several crimes are actually performed. The whole criminal process starts from the point when a thief steals the victim’s credit card information and ends when a thief opens several accounts using the victim’s identity. Statistics show that roughly 15% of identity theft victims have graver problems than their perpetrators using their identities to obtain credit. The more serious consequences include use of their identities to commit tax fraud, to obtain government files and documents, and to mislead authorities. After all, it is very easy to give just any name and any social when stopped for traffic violations, and even when arrested.

The Hazardous Effects of Identity Theft on Credit ScoresThe most damage that any identity thief can do is when he or she takes over your whole identity and starts living as you. By simply pretending to be you, they can take out auto loans, open credit accounts, receive treatment at hospitals, and even lease an apartment. However, when bills for these services are sent to them and they do not pay, imagine the damage this would do to your credit score. Practically everything would come tumbling down in the form of charge-offs, delinquencies, evictions, repossessions, collections, and more.

Identity theft costs can add up to an average of $10,000 per victim. This figure makes up roughly 70% of costs incurred by financial institutions and businesses all over the world. Expenses that consumers have to deal with out of their own pockets can even be higher. Moreover, it has been determined that victims spend an average of 30 hours clearing purchases they never made. More importantly, they spend these many hours clearing their names.

In general, what takes much time here would be efforts of victims in clearing their credit reports of fraudulent accounts. This is the most difficult part because both credit bureaus and lenders would just point fingers at each other. The lenders are the ones at fault, bureaus would say because they have already been informed that any account opened under a victim’s name would most likely be fraudulent, but they still open these anyway.

To avoid this, protect yourself. There are ways when you unknowingly put yourself in harm’s way, like when you use your card for dinner at a restaurant. A crooked waiter could run your card through a device known as skimmer, which collects all the information that your card’s black strip contains. Protect yourself as much as you can and make sure to check purchases charged to your credit account once in a while. Do not wait for your bill to arrive – take action now.

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