Smarter Loans Identity Theft Series (Part 1 of 3) – How Identity Theft Can Ruin Credit and Finances

Identity Theft  

This is the first in the Smarter.Loans series of articles on the topic of a real 21st century threat to credit and finances; namely, identity theft. Night and day, news reports worldwide broadcast the devastating consequences of this crime such as bad credit, lost time and money, stress and much more.


According to one of the leading credit reporting agencies, there are 19 new identity theft victims every minute. Each person whose identity has been stolen faces financial hardship on some level.


Part one of this series covers these subjects:

  1. Identify Theft Exposed
  2. How Thieves Rob Consumers of Identity
  3. 7 Common Signs of Identity Theft
  4. The Financial Impact and Other Troubles
  5. 10 Actions Victims Can Take


Identity Theft Exposed

In early 2018, a major research company released a study on identity fraud which determined that in 2017 over 16 million people in the United States had their identity stolen, with approximately $16 billion lost. Unfortunately, this financial crime is still growing.


Like its name implies, identity theft involves stealing a personal profile to be used by an imposter. The fraudster then opens a line of credit, personal loan, auto loan, or other credit in the victim’s name. The intent is to run up as much debt as possible with no intention to pay.


In order to commit identity theft, criminals need certain private information to apply for credit that is usually only known by the consumer, such as:


  1. Name and/or address
  2. Driver’s license number
  3. Social security number
  4. Mother’s maiden name
  5. Date of birth


With some or all of this data, the opportunistic criminal can wreak havoc upon an unsuspecting person’s finances. Even worse, it can be used in criminal activity which can result in false criminal charges against the victim. The information is also utilized to drain bank accounts.


How Thieves Rob Consumers of Identity

Sometimes information is uncovered by accident (due to computer failure, for instance) but not used illegally. And many Good Samaritans have returned cash or credit cards which have been dropped unknowingly. But often, people lose their purse or wallet and it is found by a thief who uses what it contains. Theft also occurs when identifying information is revealed and then used without authorization due to a data breach.


Other ways identities are stolen:

  1. Email spam designed to gather sensitive consumer information
  2. Thieves watching people put in debit card PIN numbers at stores
  3. Intact pre-approved credit cards thrown in the trash
  4. Telemarketing calls asking for personal information.
  5. Paperwork with personal information left in the open or thrown away without shredding
  6. Unsecured websites
  7. Malware or spyware on a personal computer


Highjacked identities and data breaches of all shapes and sizes have become more rampant recently. As soon as new security measures are put in place, criminals find ways to get around them. Increased consumer awareness, coupled with preventive measures, serve to lessen the blows in some cases. Watching for signs of a security breach is always a good idea.


7 Common Signs of Identity Theft

It has become commonplace for people to get notices from credit card companies, banks, or stores that their customers’ personal data has been compromised. The company may offer free credit monitoring for a year. Most banks will shut down a debit card and issue a new one if it suspects the customer’s account has been compromised. Usually, the media also blasts these incidents everywhere to warn the public.

Then there are instances when a person has no idea that a perpetrator has been digging around in their credit card accounts, taking out personal loans in their name or other illegal mischief until it is far too late. There are signs to look out for that can serve as a heads-up that something is terribly wrong.


They include:

  1. A check or credit card is unexpectedly declined
  2. Unauthorized bank account withdrawals
  3. Medical bills for unknown illnesses or rejection of a claim due to maxed out benefits
  4. Unfamiliar bills for loan payments, credit cards or other credit
  5. Mail service stops (thieves sometimes change the address on a credit file)
  6. Collection calls and letters from unidentified lenders
  7. Notice from the government that two tax returns were filed with the same name


These are just some indications that identity theft has taken place. It is extremely important for consumers to be watchful at all times. Yet no matter how vigilant or careful, such disastrous crimes can and do happen.


The Financial Impact and Other Troubles

Identity theft can literally turn a person’s life upside down. For example, when anyone applies for credit, the inquiry can reduce a credit score by up to 10 points or more. Identity thieves typically apply for as much credit as possible before they are caught, which causes the victim’s credit to plummet until the issue is resolved. For individuals unaware of a breach, the missed payments on the illegally opened accounts definitely contribute to a bad credit report. Another negative consequence is the large amount of debt which also severely damages credit. The list is endless; and the financial impact doesn’t end there.


As if the headache and hassle of repairing credit isn’t enough, finances are affected in other ways like:

  1. Loans, leases, or employment denied due to bad credit
  2. Potential defense of false illegal activities in the victim’s name
  3. Tax refunds delayed because of possible fraud
  4. Financial strain of waiting for stolen money from bank accounts to be returned


These are just a few things that happen when identity is violated. There are actions that a victim can take to stop the offender from causing further damage so they can begin to fix the damage. 


10 Actions Victims Can Take

Anyone who discovers that their identity has been stolen should immediately start on the road to financial recovery. Some of the process takes time; other steps provide immediate relief. In time, though, things will turn around.


As soon as possible, individuals should:

  1. Report the crime to the local police department and any pertinent governmental consumer policing entities in the region, such as the Federal Trade Commission in the United States. They will provide documentation and information on the rights of consumers whose identities have been stolen.
  2. Give copies of all police reports and affidavits to collection agencies so they can cease collection activities and remove entries on the credit report.
  3. Contact credit card companies and banks to report fraud and to find out what other remedies they offer, such as amending the credit report.
  4. Change passwords on all accounts
  5. File disputes for each incident on the credit report with each agency (TransUnion, Experian and Equifax)
  6. Place a freeze and/or fraud alert on all credit reports to prevent further unauthorized activity
  7. Inform the local tax authority and insurance companies of the breach.
  8. Make reports and get replacement identification (driver’s license, social security cards, etc.) if lost or stolen.
  9. Alert utility companies of the incident in case someone tries to open accounts in the victim’s name.
  10. Reach out directly to every company with a fraudulent credit file, including any leases or other rentals. Report the breach, close the accounts, and have them removed from the credit file.


Victims should take advantage of any and all resources to help them get relief from their financial woes. Although they can expect to spend many frustrating hours untangling the mess that identity theft creates, the process can save many years of ruined credit and financial rejection which happened through no fault of their own.

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Smarter Loans Staff

The Smarter Loans Staff is made up of writers, researchers, journalists, business leaders and industry experts who carefully research, analyze and produce Canada's highest quality content when it comes to money matters, on behalf of Smarter Loans. While we cannot possibly name every person involved in the process, we collectively credit them as Smarter Loans Writing Staff. Our work has been featured in the Toronto Star, National Post and many other publications. Today, Smarter Loans is recognized in Canada as the go-to destination for financial education, and was named the "GPS of Fintech Lending" by the Toronto Star in 2019.