Data breaches have become increasingly common, and the resulting identity theft can impact your life in more than one way. There is the financial cost - the amount of money that you lose as a result of your stolen identity. The offender may go on a shopping spree or take out a loan in your name. The indirect cost of identity theft includes lost wages, legal fees, postage and other expenses accrued in the aftermath of the incident. There’s more.
Identity theft impacts your credit score
Resolution times for fraud can be long
Identity thieves have no intention of paying the bills they have racked up on the new credit card they have opened using your information. Although you’re not liable for paying back fraudulent charges made in your name, it usually takes time for fraud to resolve. On average, fraud takes between 100-200 hours and six months to correct, and may take thousands of hours in some cases to resolve fully.
If the fraud is caught early, say within 1-7 days after the unauthorized charges are made, and reported immediately, it may take many weeks for the removal of fraudulent charges to reflect on your credit report. It will result in missed payments that really aren’t your fault, and your credit score will reflect these payments until the unauthorized charges are removed.
Credit utilization, the ratio of how much you currently owe divided by your credit limit, is another factor. It is advisable to keep credit utilization at or below 30%. Identity thieves tend to create an identity as soon as possible before they’re caught, which can motivate them to run up credit card balances at an accelerated pace. High balances result in higher credit utilization, and may exceed 30% in many cases. An increase in your credit utilization will negatively affect your credit score. The good news is that your credit utilization is restored to normal levels when the unauthorized charges are removed from your credit report.
Length of your credit history
The length of your credit history (or credit age) also factors into your overall credit score. Your credit score takes these things into account: how long your credit accounts have been open, the age of your oldest account, the age of your newest account, and the average age of all your accounts.
Opening more than one new credit line at a time isn’t recommended. Unfortunately, identity thieves often open many new lines of credit at a time. This shortens the average age of your accounts, and has an adverse impact on your credit score.
Finally, credit inquiries have a bearing on your credit score. Inquiries can be hard or soft. A soft inquiry, such as checking your own credit score, doesn’t have any consequences. But a hard inquiry, such as applying to open a new credit line or financing a car, results in a hard inquiry and affects your credit score.
The intangible impact: Your emotional health
There is also a lesser discussed emotional impact of a data breach that may be similar to those who have experienced assault and home invasion. Ongoing financial stress has been linked to heart disease, diabetes and migraines, and unhealthy coping behaviors such as alcohol misuse and unhealthy eating.
A study of the influence of financial stressors on psychosocial functioning and inflammation in a sample of middle-aged adults found that individuals who experience more major financial stressors have higher levels of psychological distress and lower levels of psychological well-being, which may indirectly affect inflammatory activity.
There is abundant research suggesting the negative impact on psychological and potentially, physical health, from financial stress.
Statistics on identity theft from the Bureau of Justice Statistics
The latest (2016) statistics on identity theft from the Bureau of Justice Statistics, the federal government agency collecting, analyzing and publishing data relating to crime in the United States, found that 10% of persons aged 16 years or older had been victims of identity theft during the prior 12 months. The survey found that more females (13.5 million) experienced identity theft compared to males (12.5 million).
A snapshot of the most recent data breaches
In 2019, more than 7.9 billion consumer records were exposed as a result of hacking attacks. The biggest data breaches were suffered by Quest Diagnostics, Houzz, Capital One, Dubsmash and Zynga. In 2020, online learning platform OneClass was hit with a breach where records of over one million North American students, among them many minors, were exposed on an unsecured server. TrueCaller, the popular caller ID and spam blocking app used by over 40 million Indians, was hacked in May this year. Hackers had made the personal data of millions available on the dark web for as less as $1,000.
Identity theft can put you in a vulnerable position. One of the ways to mitigate the impact of a data breach is to use different alias email addresses for the different services you use. By hiding your actual email address behind disposable aliases, you can prevent any possible attacks directed towards your email accounts.