5 Steps to Fixing Credit After Identity Theft

All you have to do is turn on your television every once in a while and you’ll see that, once again, some large company was the victim of a large scale data breach and identity theft.

Target, Home Depot, Michaels, Sony, the list goes on and on. Still, the fact that there are scam artists who want to steal your personal information is not breaking news.The Federal Trade Commission received more than 332,000 fraud related complaints in 2014.

The good news is that victims of identity theft have many legal protections and even more tools to help them prevent and then undo the damage done to their credit reports by fraudsters.

Here are five steps to consider taking if your credit has been damaged by the actions of an identity thief:

1. Freeze your credit reports

If you discover that a scammer has opened accounts fraudulently using your personal information, one of the first steps you should take is to place a security freeze on all three of your credit reports.

The freeze is so effective at stopping scammers in their tracks because it results in your credit reports being taken out of circulation, preventing new lenders from gaining any access to them. If lenders are unable to access your credit reports then there is no way a new account will be opened in your name.

If you’ve been the victim of identity theft then security freezes are free. If you have not been the victim of identity theft you can still freeze your credit reports but there’s a fee involved.

You can place freezes by contacting each of the three credit reporting agencies individually in order to set up your login and password credentials, which you’ll use to manage the access to your credit reports.

Keep in mind that whenever you wish to use your credit reports again to apply for credit then it will be necessary to contact each credit bureau in order to “thaw” your reports and have them placed back into circulation.

2. Place fraud alerts

If you suspect that you may be a victim of identity theft then placing a fraud alert on your credit reports should be done immediately. This informs any future lender who reviews your reports that they should contact you in order to verify your identity before opening a new account.

A fraud alert can be placed on your credit reports for 90 days initially and can be extended for a period of up to seven years for consumers willing to provide proof that identity theft has occurred.

Fraud alerts, like some credit freezes, are completely free. Fraud alerts can be placed on all three of your credit reports with a single phone call to just one of the three credit bureaus. For example, if you call Equifax to place a fraud alert on your credit report then Equifax is responsible for notifying Trans Union and Experian.

Unlike a credit freeze, fraud alerts do not prohibit lenders from accessing your reports and credit scores. Therefore new accounts could still be opened in your name, though not very easily.

3. Assess the damage and consider credit monitoring

Figuring out just how much damage has occurred to your credit reports is another important step for anyone who is concerned that their personal information may have been stolen by a scammer. Thanks to the Fair Credit Reporting Act you are entitled to receive a free copy of all three of your credit reports every 12 months via annualcreditreport.com.

Review your credit reports with a fine-toothed comb and make a list of every fraudulent account and every unauthorized credit inquiry, if any. This information will be important when you file your identity theft report and notify the credit bureaus of the fraud.

Hopefully the fraud alerts and/or credit freeze you placed on your credit reports will prevent any new fraudulent accounts from being opened in your name. But if you think a fraud alert is not strong enough and a security freeze is overkill, then subscribing to a credit monitoring service might give you a little peace of mind.

Credit monitoring services passively track the information on your credit reports for changes that are indicative of fraud, like new inquiries or newly opened accounts. There are monthly fees associated with most credit monitoring services so you will have to decide if the cost is worth the benefits.

4. Complete an identity theft report

Once you have checked your credit reports and confirmed that you have indeed become the victim of identity theft then it’s very important to file an identity theft report. An identity theft report can be defined as any police report or fraud report filed with a law enforcement agency.

Filing an identity theft report will be useful should you wish to file an extended fraud report and also when you contact the credit bureaus to begin the process of cleaning up the damage to your credit reports.

There have been many instances in the past where consumers have attempted to game the credit reporting system by filing an identity theft report in order to have negative but accurate accounts removed from their credit reports. Filing a false identity theft report might seem like a shortcut to better credit, but doing so can have some very serious legal consequences. Filing knowingly false disputes with the credit reporting agencies is one thing but filing knowingly false police reports is illegal.

5. Clean up the damage

Once you have completed your identity theft reports and made a list of the fraudulent accounts and unauthorized inquiries plaguing your credit reports then it’s time to contact the credit bureaus directly (Equifax, Trans Union, and Experian).

You can and should file your dispute independently with each of the three credit bureaus regarding all of the fraudulent information appearing on your credit reports. Be sure to include a copy of your identity theft report with your disputes.

When you notify the credit reporting agencies that you have fraudulent information as a result of identity theft,  they have an obligation to move much more quickly than they would in the standard credit report dispute process. The credit reporting agencies are required to block the fraudulent accounts from your credit reports within just four business days from the date they are notified of the identity theft.