As the world becomes more digital and people have less control over how their data is collected and shared, the risk of identity theft is increasing alongside the incidence of it happening. Data leaks make the headlines on an almost daily basis, with sensitive information making its way to the black market.
Those attention-grabbing headlines tend to focus on sectors like healthcare, law enforcement, and governments, however, most data leaks go under the radar. These data leaks have the highest impact on ordinary people as it is information about private citizens being traded by criminals.
Let’s explore digital identity theft in detail and discover how it impacts your credit score.
Digital Identity Theft Prevalence
In times gone by, identity theft would consist of a criminal stealing someone’s identity by forging paperwork and registering themselves for financial products. Identity theft was a difficult crime to commit with a lot of risk for criminals and relatively low returns.
For this reason, until the rise of the internet, identity theft was a rare crime. There were simpler ways for criminals to make money without the high risks involved.
With the rise of the internet and people sharing personal information online for all manner of services, criminals have realised that identity theft is extremely lucrative. Unlike in the past, where a criminal needed to target one individual at a time, criminals can now purchase thousands of identities at a time.
As a result, identity theft has become a hugely prevalent crime and the reporting of identity theft crimes has increased exponentially.
Data Leaks and Data Protection
A large part of the problem that leads to identity theft is the integrity of the systems companies use to secure and store data.
Despite a large amount of data leaks occurring, we should not always assume that an organisation has been negligent. In fact, many corporations spend vast sums of money trying to keep data safe. The problem is that criminals are working on the next exploit while a company is patching the last exploit.
What’s more, customers operate under the illusion that existing laws offer a large amount of protection, but they don’t. Data protection laws set out storage standards and the rights of customers in accessing their data.
The truth is, the framework is not empowering to individuals beyond that and once you consent to your data being stored or shared, you have no control over any outcomes of that decision.
How Identity Theft Works
Spreadsheets are compiled and sold on the black market. The more recent and complete the information, the higher the value of the data being purchased. If the data already includes sensitive information such as banking details, the data can command high prices for the criminals fencing the data on the black market.
Once a criminal purchases your identity, they have several options available to them. The most common route to gain easy money is to clone existing debit or credit cards. Often criminals prefer cloning credit cards as most people will wait for a monthly statement before realising something is amiss.
In rare cases, criminals are altogether more ambitious and there have been instances of people taking mortgages, even buying and selling property in other people’s names.
What Damage Can Identity Theft Do to Your Credit Score
Undoubtedly, any financial loss can have a knock-on effect and damage your credit score. Credit scores are particularly damaged in instances where criminals use your information to take out new loans and credit scores. Of course, you will not necessarily be aware a new financial agreement has been taken in your name and you will ultimately miss payments and default on that debt.
In these cases, your credit score can be trashed completely in a very short space of time as criminals borrow as much money as possible until they get declined further credit because your score has dropped too much.
How Do I Prevent Identity Theft?
There are a few ways you can prevent identity theft. The easiest way is to limit who with whom and when you are sharing your personal information. You should be extremely cautious of sharing sensitive information online, such as bank details.
There are always going to be instances where you share personal and sensitive information, but you should check the credentials of the company you are looking to share information with.
Each company must share by law how they store, process, and protect your data. Scrutinise this information and look for any areas that make you uncomfortable. If the information is unclear, has gaps, or indicates sharing your information with other providers, it might be best to limit the data you provide or not provide data at all.
Who Do I Report Identity Theft To?
Primarily, identity theft is a criminal offense, and you should report the crime to the police and to Action Fraud. Both entities work together with growing sophistication to track down criminals and prevent them from stealing other people’s money and identities.
What If My Credit Score Shows Suspicious Activity?
You may also find a lot of erroneous information registered against your name on your credit report if you have been a victim of identity theft.
Credit reference agencies have a process for you to follow to challenge any information that is incorrect on your credit profile. This is known as a dispute process and credit reference agencies are normally quick to respond and rectify any errors.
It helps to provide your credit reference agency with information that you have been a victim of crime such as a crime reference number. They may ask for further information to ensure they are restoring your credit profile correctly.
Bad Credit – Improving Your Credit Score
Unfortunately, sometimes, even reporting identity theft to the relevant authorities and a credit reference agency may not restore your credit score.
In fact, sometimes people are still left with the debt a criminal has taken in their name. You can improve your credit score by taking careful action and only using credit facilities when needed. In the UK, the first bad credit comparison site has been launched to help those with adverse credit find better products and improve their scores through credit builder loans.
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