What To Know About Data Breaches, ID Theft And Your Credit

As we spend more time online, the chances of our personal information being exposed due to a data breach increase drastically, and with it, the risk of identity theft and potential credit problems.

A data breach can expose your sensitive data, like your credit card or social security number. This can lead to fraudsters making unauthorized purchases, opening up credit accounts in your name and more, all of which can damage your credit history.

Let's take a look at how data breaches occur, the consequences of identity theft and the steps you can take to protect your credit.

What Is a Data Breach?

A data breach, or data leak, is a cybersecurity incident where hackers or other unauthorized individuals get access to people’s personal or financial information.

Information that can be compromised in a data breach includes:

• Social security numbers
• Birth dates
• Passport numbers
• Account passwords
• Home addresses
• Emails
• Credit card numbers
• Medical records

How do data breaches happen?

Data breaches usually happen when cybercriminals infiltrate a company's computer systems and networks. Hackers may deploy malware, like viruses and trojans, to gain remote access to databases and steal or manipulate data. They may also take advantage of security vulnerabilities in software or websites, such as outdated software or flaws in the programming code.

Cybercriminals commonly use phishing attacks as well, where they pretend to be a trustworthy entity and deceive you into sharing sensitive information. Phishing often comes in the form of fraudulent emails or websites designed to look legitimate, tricking users into sharing their credentials or downloading malicious software.

However, it's also possible for data leaks to happen due to an insider threat. These incidents happen when an employee steals or mishandles data. Additionally, security incidents can happen if devices, like laptops or smartphones, are lost or stolen and are accessed by an unauthorized third party.

How Data Breaches Can Lead to Identity Theft

If your information is exposed because of a data leak, you may become a victim of identity theft. This can have long-term financial consequences and a negative impact on your credit.

What is identity theft?

Identity theft is the act of unlawfully obtaining and using someone else's personal information, such as their social security number, without their permission. This is typically done to commit fraud or other crimes, often for financial gain.

What do hackers do with your information?

Hackers and other identity thieves may use your information to open credit card accounts, make unauthorized purchases, apply for loans, request government aid and more.

Additionally, hackers may use your data to do phishing campaigns, which involves crafting convincing emails or messages that seem legitimate to trick recipients into sharing their passwords, verification keys and other confidential information. This tactic allows hackers to access more of your accounts and steal even more data.

They may also sell sensitive data like credit card numbers or login credentials on the dark web to other fraudsters.

Potential Impact Of Identity Theft On Your Credit

Identity theft can severely impact your credit history if a fraudster uses your personal information to apply for credit cards, take out loans or make unauthorized purchases. If these fraudulent activities go undetected for several months, your credit score will likely drop due to missed payments and high levels of debt incurred by the thief.

Once your credit score drops, you might get denied when applying for loans or credit cards. And if you do qualify for these financial products, you'll pay higher interest rates and have lower credit limits. You may also find it difficult to rent an apartment, as most landlords now run credit checks.

What To Do After A Data Breach

After a data breach, you should take immediate action to safeguard your online accounts and credit history. These are the steps you should follow:

• Check your monthly statements for fraudulent transactions and notify your bank or credit card company if you find any.
  Regularly check your credit report for accounts that you didn't open yourself.
• If you find any evidence of identity theft on your monthly bills or credit report, report it to the Federal Trade Commission (FTC) at IdentityTheft.gov.
• File a police report with your local police department.
• Set up a credit freeze to block access to your credit report to prevent fraudsters from opening accounts in your name.
• Instead of a credit freeze, you could request a fraud alert. This lets creditors know that they should take extra steps to verify your identity before approving a credit application.
• If you find any fraudulent accounts on your credit report, dispute them by contacting the main credit bureaus (Experian, Equifax and Transunion).
• Change the passwords of all of your affected accounts, and ensure they are strong and unique. Avoid easily guessable words or phrases and consider using a password manager.
• Enable multi-factor authentication (MFA) wherever possible to add an extra layer of security.

Another step you may consider is signing up for a credit monitoring service to help keep track of any further fraudulent activity.

For more information on what to do after a data breach, check out our guide on how to protect yourself from identity theft.