Would you like to know how does identity theft protection affect your credit score? Computer crime, and particularly identity theft, is on the rise with millions of users being ripped off through various means every year.
Identity theft protection services have become one of the necessary measures to protect personal information and assets.
However, many ask themselves whether they can participate in these services and whether it will affect their credit rating.
This article will answer the question in detail and explain how identity theft protection works and impacts your credit score.
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Now, let’s get started.
Myths About Identity Theft Protection
The following are some of the common misconceptions that users have when it comes to protecting themselves from identity theft.
The first misconception citizens have is that signing up for identity theft protection services will harm one’s credit rating.
This is not true. The services are meant to track your credit records and identity, notify you of fraudulent activities, and help you recover from identity theft. Still, they do not affect your credit rating.
The second myth is that identity theft protection is unnecessary if the person closely monitors his credit reports.
However, credit monitoring services provide extra security, including features like dark web monitoring, social media monitoring, and insurance that an individual cannot do.
The Impact Of Identity Theft Protection On Financial Security
Identity theft protection services, therefore, come in handy in boosting financial security through constant checking and notification.
These services monitor your credit report from the major credit bureaus (Experian, Equifax, and TransUnion) and notify you of any changes or activities, such as new account openings or changes in your credit score.
By being proactive, they assist in preventing possible fraud cases from worsening on their own.
Besides monitoring, all these services provide identity restoration support. If you fall victim to identity theft, the service providers assist you by filing a police report, notifying the creditors, and rebuilding your credit.
This professional guidance is very helpful to address and cope with the issues involved in identity theft and its effect on one’s financial security.
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Do Identity Theft Protection Services Affect Credit Scores?
Now that we understand the misconceptions and the importance of identity theft protection, let’s address the central question: Does using these services impact your credit rating? The short answer to the last question is no; identity theft protection services do not affect your credit score. Here’s why:
- Credit Monitoring Is Passive
Credit monitoring services follow your credit activity and inform you of any changes.
They are not involved in managing your credit report or taking actions that may impact your credit score, like applying for credit cards or making inquiries.
- Soft Inquiries
Suppose identity theft protection services are monitoring your credit reports. In that case, they are likely to do so with “soft inquiries,” which do not impact credit scores, unlike “hard inquiries,” which occur when a person is applying for credit and subsequently lowers their score slightly.
- Proactive Protection
Since identity theft protection informs you of the activity and possible fraud, it can ensure that you have a better credit rating.
It enables you to deal with them before they reach a level where so much harm can be done to your score.
Important Aspects That One Needs to Consider in Identity Theft Protection Services
To find the best identity theft protection service, it is critical to consider the features that would offer adequate security for your identity. Key features to look for include:
- Real-Time Alerts
It is important to verify that the service sends notifications as soon as there is an indication of a data breach.
If you do not want to lose all your money and be in big debt soon, you need to act fast; immediate notification enables you to do that.
- Comprehensive Monitoring
Ensure that the services range from credit monitoring, the dark web, social media app checks, and public records checks.
Such a wide spectrum of coverage can help identify prospective threats from different sources.
- Identity Restoration Support
As it was established earlier, receiving professional assistance to restore identity is essential in the case of identity theft.
Such help can greatly simplify and alleviate the tension linked with the recovery of the identity.
- Insurance Coverage
One common feature of many identity theft protection services is that besides protection, they offer insurance coverage to reimburse you for any expenses you will have to incur while recovering from the theft.
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What Are The Possible Drawbacks Associated With Identity Theft Protection?
While identity theft protection services offer significant benefits, it’s important to be aware of potential drawbacks:
Cost
Also, depending on the services provided, they can be costly, especially when charged monthly. T
he cost should be justified against the given level of protection and the sense of security that comes with the investments.
Over-Reliance
People can become lethargic and rely solely on these identity theft protection services.
The best way is to remain vigilant by periodically monitoring the credit reports and refrain from carelessly sharing personal data.
Does Identity Theft Affect Your Credit Score?
Yes. Identity theft can significantly impact your credit scores, and the financial effect can be long-lasting, taking several months or even years to resolve.
We will shortly outline some of the ways that your credit scores can be affected by identity theft and what you can do to mitigate the damage.
Immediate Financial Impact
Identity theft can involve a thief using your details to obtain credit cards and loans or make purchases fraudulently.
These fraudulent activities can escalate your debts and default within the shortest period.
Because payment history and credit utilization rate are essential in the computation of the score, poor payment and high credit balances resulting from theft are likely to affect the score greatly.
Long-Term Damage
Due to identity theft, your credit score may take ages to recover, even if you can identify the perpetrator and report the case.
Disputing fraudulent information, especially on your credit report, requires going through a tiresome process of disputing with credit bureaus and creditors.
The negative entries stay on your report during this time, meaning they are still weighing down your score.
In addition, if identity theft results in multiple hard inquiries concerning credit in your name, your score will be affected even more.
Measures to Minimize The Effects
However, acting fast if your credit score has been affected by identity theft is advisable. When you discover identity theft, file a fraud alert with one of the three credit bureaus – Experian, Equifax, or TransUnion.
This alert informs any creditor to exercise caution and seek other means of identifying you before offering credit.
Also, try to engage in a credit freeze to refrain from opening any credit accounts in your name.
Subsequently, check your credit reports for fraudulent accounts or transactions and report them to the credit reporting agencies.
Other crucial procedures include notifying the FTC and filing a police report, which helps to document the theft and prepare for the dispute.
Having your identity stolen often reduces your credit score through a high level of debt and missed payments in addition to a hard inquiries credit list.
Act immediately to lessen the impact and avoid additional harm by putting in fraud alerts, freezing your credit, and disputing fraudulent entries.
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How Long Does It Take To Clear Identity Theft?
Clearing an identity theft can be lengthy and complex and can take several months to several years, depending on how severe the fraud is.
According to the FTC, it may take about six months and 200 hours to regain control after identity theft.
This estimation is based on the energy required to guarantee that the victim is not to blame for the debt accrued.
Below are some guidelines for what to do and the general process of handling identity theft.
Initial Steps and Reporting
The first thing that needs to be done to combat identity theft is to file a fraud alert with one of the three credit reporting bureaus: Experian, Equifax, or TransUnion. This initial step usually takes a few days.
You should also file a report with the Federal Trade Commission (FTC) through IdentityTheft.gov and contact your local police department to file a report.
These actions assist in formally documenting the theft, which is important during recovery.
Disputing Fraudulent Activities
Subsequently, you must check through your credit report for any accounts or spending you did not authorize.
Contesting such fraudulent entries may take weeks or months as each bureau investigates and responds to your dispute.
Getting in touch with creditors to have fraudulent accounts closed and any unauthorized charges reversed is a process that takes more time.
Long-Term Resolution
It may take up to a year or even more in cases where massive fraudulent activity is detected.
The process of repairing a credit report, eliminating all fake accounts, and ensuring no traces of identity theft on your credit report is slow and constant.
In conclusion, the FTC believes that resolving identity theft can take about six months and about 200 hours of effort.
Thus, the main recommendation is to follow the steps of timely reporting and monitoring and not give up when disputing the fraud.
How To Get A Loan After Identity Theft?
The process of obtaining a loan after going through identity theft can be challenging but possible, especially if you follow careful steps and are persistent.
You can improve your chances of securing a loan after your identity has been compromised by following the tips below:
Repair Your Credit
The first thing you must do is to repair the damage done to your credit report. You can start the repair process by contacting the three known credit bureaus: Equifax, TransUnion, and Experian.
You have to contact them to dispute fraudulent accounts and transactions found on your account. You would normally be required to provide documentation such as your police report and FTC report to support your claims.
This process takes time, but you must be persistent if you desire to restore your credit score.
Monitor Your Credit Reports
It is important to keep track of the credit reports periodically. Check that all the fraudulent entries have been deleted and your credit history is reported correctly.
There are three credit bureaus, and you are entitled to one free credit report each through AnnualCreditReport.com.
Freeze And Unfreeze Your Credit
Put a credit freeze on your reports to avoid further fraudulent activities. The freeze can be temporarily lifted when you are ready to apply for a loan.
This puts you in a position to manage who has access to your credit information, thus minimizing the chances of other frauds.
Improve Your Creditworthiness
When fixing your credit score, you should embark on enhancing your creditworthiness. This means eliminating existing credits, ensuring you make regular payments, and avoiding creating new lines of credit.
With a higher credit score, lenders will consider you a better borrower than other people.
Communicate With Lenders
When seeking a loan, do not hide that you have been a victim of identity theft. Make sure to give them the papers proving that you have resolved the problem and have taken measures to protect your credit.
Financial institutions might be more inclined to cooperate with you if they know the circumstances.
Consider Alternative Lenders
If traditional lenders remain skeptical, consider other funding sources. Online lenders, credit unions, and P2P lending services may be more lenient for people who have been victims of identity theft.
All in all, the process of getting a loan after identity theft includes:
- Rebuilding your credit
- Keeping an eye on the reports
- Safeguarding your information
- Enhancing your credit standing
Therefore, by following these measures and being transparent with your lenders, you can rebuild your credit status and increase the likelihood of being approved for a loan.
ALSO READ – Tips For Identity Theft Protection
Final Thought
Now that we have established how Identity Theft Protection Affect Credit Score. Therefore, it is important to note that identity theft protection services do not impact credit scores.
They add another layer of protection to your credit accounts, notify you of any unauthorized credit activity, and help you with identity theft.
These services effectively assist you in identifying and resolving issues that may otherwise cause your credit score to deteriorate further.
However, it is crucial to distinguish between the cost and value of the services and remain cautious of personal security concerns.