Why Should First-time Homebuyers Worry About Data Breaches?

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Massive data breaches are becoming common nowadays. A few days after the massive Equifax data breach settlement news broke out, Capital One reported that sensitive information of roughly 100 million consumers in the U.S. has been compromised. As someone planning to buy a home, it is critical that you know if you’re affected by such breaches, especially if you’re applying for a mortgage.

While Capital One claimed that no credit card account numbers or log-in credentials and nearly all Social Security numbers were not compromised, the alleged hacker, whom the FBI arrested, gained access to names, birth dates, self-reported incomes, addresses, zip codes, email addresses, and phone numbers of consumers and small businesses who have applied for credit cards.

If an identity thief gains access and uses your personal information, you may find it difficult to apply for a mortgage. Below are the common ways identity thieves can use your personal information to derail your chances of buying a home:

  • Take out loans or apply for credit cards under your name
  • Use your personal information to file a fake tax return and intercept your tax refund
  • Take advantage of your health insurance benefits
  • Use your airline miles and book flights
  • Apply for a phone, electricity, or any utility accounts under your name

When you apply for a mortgage, the lender examines your credit scores and debt load information to determine the amount of loan you can borrow. If an identity thief successfully managed to take out loans or apply for credit cards under your name, the lender will either charge you more loan interest or reject your mortgage application.

Your reputation as a mortgage borrower and your finances may greatly suffer if fraudsters use your personal information. In the worst-case scenario, you may even find yourself in trouble with the law if your identity was used for a criminal activity.

Identity theft victims usually realize that they’ve become a victim once the damage has been done. Depending on the situation, it takes time to repair the damage done by identity thieves and it could greatly delay your homebuying. However, regularly monitoring your credit reports from the three major credit bureaus and finances may help you anticipate identity theft at an early stage.

Call for help if you suspect an identity theft

According to the Consumer Financial Protection Bureau (CFPB), identity thefts vary and, as a victim, you might need to get in touch with several agencies. Initially, you need to immediately notify the local police upon identity theft suspicion. If an elderly loved one or a person with disability became an identity theft victim, you may get in touch with the adult protective services agency in your area. Once you reported the suspected fraud to authorities, requesting to freeze or placing your credit report on a one-year fraud alert are some of the important steps you need to take.

After the data breach incident, Capital One will notify all affected consumers and provide them free credit monitoring and identity protection.

Massive data breaches like what happened to Equifax and Capital One may seriously derail an individual’s ability to buy a home. If you have plans on taking a mortgage, it is important that you closely monitor your credit reports and take preventive measures to reduce or eliminate identity theft risk.

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