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How identity fraud affects your credit score

Identity fraud can have really serious consequences on your credit score and can severely limit your ability to get new loans and credit. It can also lead you to have bad credit.

Let’s see how identity fraud works, how it can affect your credit score, the steps to take if you are a victim, and what to do to protect your credit rating from it.

What is identity fraud and how can it lead me to have bad credit?

Identity fraud happens when someone steals your personal information to engage in fraudulent activities, like taking loans in your name and then running away with the money.

This can lead to unauthorised transactions, unaffordable debts, and negative marks on your credit report, affecting your credit history and score.

Even if the criminal's credit applications are rejected, the mere act of applying can actually hurt your credit score. This is because each loan application involves the lender running a full credit check (called “hard check”) on your credit file.

Multiple hard checks lower your credit score because it may be a sign for lenders that you’re suddenly struggling financially and are looking for credit to cover basic expenses.

What are the first signs that my credit report might be affected by identity fraud?

The first signs that you might be a victim of identity fraud can be subtle but are very important to detect. Here are some things to look out for:

  • Charges you don't recognize on a credit card or in your bank statements.
  • Bills for items you didn't buy or services you didn’t use.
  • Accounts on your credit report that you did not open.
  • Loans or credit cards you did not apply for.
  • Hard checks on your credit report if you have not applied for new credit.
  • Calls or letters from debt collectors about bills you do not recognise.
  • Missing mail, which could indicate that it has been rerouted to a fraudster.
  • Unfamiliar addresses on your credit report.
  • Unexplained withdrawals or transfers from your bank account.
  • Loan applications that are inexplicably rejected despite you having a healthy credit score.
  • Even soft checks you don’t recognise – this may indicate that the fraudster is checking your eligibility for a loan before applying.
  • Even mortgages you don't recognise. This is rare but can happen if you own a buy-to-let and a fraudster rented your property then pretended to be you and took a secured loan on your property.

If you notice any of these signs, you need to take out action as soon as you can.

How can I protect myself from identity fraud?

Once you suspect identity fraud has happened, act quickly to reduce its impact on your credit file:

  • Report the fraud to Action Fraud Police, the branch of the UK Police in charge of cybercrime and fraud prevention.
  • Contact your bank and let them know what’s happening.
  • Reach out to the credit reference agencies (Experian, Equifax, and TransUnion) to report the suspicious activity and to let them know you might be a victim of fraud.
  • Check your three credit reports and dispute anything that looks odd.
  • Set up fraud alerts on your credit report. You can do this with services like Experian Identity Plus or Equifax Credit Report and Score.
  • Take protective registration with CIFAS. This lets lenders know that they should perform additional checks for any loan application taken in your name.
  • Finally, add a Notice of Correction to your credit file to let lenders know that you’re disputing the fraudulent items in your credit report.

However, protecting yourself from identity fraud starts with prevention.

Be cautious about sharing personal details online, shred documents with sensitive information, monitor your financial accounts and credit reports regularly, and be wary of any email or social media message asking for your data.

Stay vigilant, protect your personal information, and check your credit report regularly to make sure your credit score isn’t affected by fraud.

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