With access to the right information, cybercriminals can harm your credit health by opening cards under a fraudulent name or using other methods to steal your identity.
If you are trying to build a healthy credit score or opening a new credit card for the first time, understanding the relationship between the different forms of credit and your identity is vital to accomplish your goals.
What is credit?
Simply put, credit is the ability to get something of value now based on a promise to pay it back later, typically with interest attached. That item of value could be a product, service or even money, so credit can take many forms. A home mortgage, a loan for a car or education and credit cards for general buying power are all common examples.
Having “good credit” stems from your capability to pay back your borrowed money in full and on time. A good credit score means that you are a safe credit risk for the banks and credit unions that will decide whether to grant you a loan.
The better your score, the better the loan rates and terms you are likely to be offered. A higher credit score is usually better when it comes to being approved for loans, credit cards and certain rate offers — but it can differ depending on the lender and the type of credit you are applying for.
Most often, healthy credit scores can be attributed to the responsible use of credit and can help you access an array of beneficial credit opportunities. TransUnion’s quarterly Consumer Pulse Report found that 1 in 4 consumers plan to seek new credit or refinance within the next 12 months. Understanding the basics of credit can help you navigate these opportunities.
What is a credit report?
Your credit report is a record of your credit activity, including the type and amount of loans you have received, where they are from and your track record of making payments. These reports include a section with your personally identifiable information (PII) data points that link the credit history on the report to you. These details include your name, birth date, Social Security number, past and present addresses, phone number, and even current and former employers.
Your credit report is only available to you and companies with a permissible purpose, such as credit extensions, employee background checks, insurance and rental applications. However, if a criminal were to access these identifiers via a breach of your data, they could use them against you in ways that could harm your credit, enable an account takeover or allow them to commit identity theft.
Most consumers (93%) believe monitoring your credit is at least slightly important, and over half report they review their reports on a monthly basis. “Reviewing your credit report regularly is the best way to fight the risk of fraud,” says Margaret Poe, head of consumer credit education at TransUnion. “If you spot anything that’s off, that can be a sign of identity theft.”
How does identity theft impact your credit?
In 2021, the Federal Trade Commission received more than 1.4 million reports of identity theft, with nearly 400,000 people falling victim to credit card fraud. Whether there are false purchases made on your credit card or your identity information was compromised with your credit card details, what thieves can access and what they choose to do with your data can damage your credit score.
People with great credit scores aren’t the only ones at risk for identity theft. The Identity Theft Resource Center notes that it is a common misconception that an identity thief wouldn’t bother hacking your digital identity or spending on your credit cards if you have a poor credit score. While the thief may not be able to open new accounts or make major fraudulent purchases in your name, they still could commit fraudulent acts against you such as applying for medical care or unemployment benefits or filing taxes with your information.
How to protect yourself
In light of the risks of identity theft, managing and protecting your online profile is important. It is vital to keep an eye on your credit reports for suspicious or unfamiliar activity.
“Be on the lookout for things that can be explicitly linked to exposed PII, such as credit purchases made online, applications for loans in your name or abnormalities in your payment history,” Poe says.
If you see anything suspicious, it’s important to take action right away. Consider the following steps:
- If you think you have fallen victim to identity theft, TransUnion’s Fraud Victim Resources can provide guidance to get back on track.
- You may want to add a fraud alert or credit freeze. These free services can offer you additional protection from fraudulent and suspicious activity.
- You also may consider a digital safety and security solution with credit and identity monitoring — to detect and avoid future threats — and a team of Certified Identity Restoration Specialists who can handle all the heavy lifting involved in restoring your identity.