Identity theft impact on credit score (and how to avoid it): Bollywood celebrity Sunny Leone recently said she fell prey to online fraud.
Identity theft impact on credit score (and how to avoid it): A healthy credit score can help you get a bank loan at a lower rates. However, there are many activities that may lower your credit score. While many of these activities are within our control, some are due to external factors. Identity theft is one such activity, which is not just beyond the control of customers but also affects their credit score. However, such wrongdoings can be corrected (details below).
Identity theft issue was highlighted recently when Bollywood celebrity Sunny Leone reported that she fell prey to online fraud. The actor said her PAN card was fraudulently used for a loan of Rs 2000, affecting her CIBIL score.
Experts say that such incidents directly hit your credit score and if not corrected in time it has long term implications as future lenders continue to see this as an actual default, impacting your future borrowing capabilities.
According to Anurag Sinha, Co-founder and CEO, OneScore, with the adoption of digital solutions on the go, there has been a rise in cyber-attacks and fraudulent activities too.
Identity theft: What fraudsters do
Fraudsters steal the identity of actual customers digitally and take a loan using the latter’s Personally Identifiable Information (PII), with no intention to pay off the debt.
“In case of identity theft, the user becomes aware of the fraud only when the lender starts chasing for repayment or while checking the credit report or when one hears from a collection agency about the dues. However, by then, one’s credit score has already taken a hit,” Sinha told FE Online.
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Sinha further said that even after the impacted party reaches out to the lender informing about such a fraud, the lender will also take some time to decide whether it’s really a case of identity fraud or not.
“And during all such time, non-repayments would have got reported against the impacted party, which would impact credit scores in a significant manner,” he added.
Why credit score is important
According to Sinha, a credit score not just showcases your credit history but also indicates to the lender about your ability to repay a loan in the future.
“The credit score is therefore a vital key for a lender to ascertain the creditworthiness of an individual,” he said. However, identity theft can stamp negative information on to one’s credit report, which then drops their credit score and limits one’s ability to qualify for loans.
This is why checking your credit report regularly is very important as it showcases not only your past but also existing loans and credit card dues.
“Identity theft calls for swift action, in the absence of which the event can have long term implications as future lenders will continue to see this as an actual default, impacting your future borrowing capabilities,” Sinha said.
How to avoid identity theft?
Sinha said that regular verification of one’s credit report is extremely important to safeguard one against such frauds.
Such frauds usually happen without one’s knowledge, however the sooner one knows about it, the more effectively one can combat such frauds. It’s important to check one’s credit report as a regular habit, preferably every month. Regular review helps one to be aware of what gets included in one’s credit report,” he said.
Customers should check out for the following on a regular basis:
- Whether all loans/cards mentioned in the report, really belong to you
- Whether all loans/cards taken by you are reflected correctly in your report
- Whether all closures, repayments of your loans/cards reflecting properly or not
If anything wrong is detected, one should immediately share it with the bureau, financial institution, and the authorities for corrective action.
What should identity theft victims do?
Identity theft victims should immediately reach out to the lender and lodge a complaint about the same. He/she should also reach out to all four credit bureaus and request the removal of the account from one’s report.
“Credit bureaus then coordinate with the lender and remove these accounts after confirmation from the lender. Once removed permanently, it will correct the credit score,” said Sinha.
“Regular review of credit report helps one to disputing credit report errors on time which is crucial for one’s credit health. This thus prevents any unnecessary damage to one’s score and helps one to access credit products easily in the future,” he added.