This post comes from Bob Sullivan at partner site Credit.com.
What ailment is so devastating that its symptoms can range from an incorrect medical diagnosis to (virtually) killing you or to hurting your kids’ chances of getting college financial aid?
That distinctly digital-age malady? Identity theft.
In a world of overused metaphors, this one is spot on: If Franz Kafka were writing today, he wouldn’t haul Josef K. in front of a tribunal. He’d just cast the man as an identity theft victim opening his mail in despondency every day.
When an impostor uses a victim’s identity to buy something and fails to pay the bill, the headache can last for years. Unpaid bills leave a big blemish on your credit report, which can have far-reaching financial implications. It might prevent you from buying a home, for example.
But the impact of identity theft can spread much further and wider than money. Today, we’re going to examine the radioactive byproducts of having your identity stolen.
1. Hurt your job prospects
Many employers now routinely look at credit history when assessing job candidates (about half, according to a 2012 study by the Society for Human Resource Management). A report pockmarked by ID theft-related errors could sink your application.
Employers can’t reject you because of what they see on your credit report without telling you, but then, employers can also gin up any old excuse for rejecting you.
Legislation to eliminate the practice has been proposed by U.S. Sen. Elizabeth Warren, D-Mass., and others, and a few states limit it, but odds are you live in a place where an impostor can steal your money and your job prospects.
P.S.: In a related way, posting your resume online or on job boards can also increase your chances of becoming an identity theft victim.
2. Cause your auto insurance rates to rise
Virtually all auto insurers use credit scores to set rates, wherever it’s legal (California and Massachusetts ban the practice). A low score can hike premiums by 20 to 50 percent.
Insurers can’t outright reject you because of your credit score without telling you, but they can use the score to offer you higher rates without giving you an explanation. ID theft victims who are struggling to clean up their credit reports are almost certainly paying higher auto insurance rates as a result and have no way of learning how much the identity theft victim “tax” is.
3. Get you a surprise tax bill
Identity theft isn’t just for stealing money. One form of ID theft known as SSN-only ID theft involves using a victim’s Social Security number in job applications, generally to fulfill government residency status requirements. These impostors can work for years without discovery, paying their bills and their taxes, using their own name (or a separate victim’s name) and the victim’s SSN.
But if the impostor ultimately fails to pay taxes, the Internal Revenue Service will try to collect from the rightful holder of the SSN. Then, it’s up to the victim to prove he or she didn’t actually earn the money.
4. Impact your Social Security income credits
In a similar way, SSN-only imposters pay into the Social Security system and build up earnings credits that can theoretically be used to draw out Social Security payments later in the life. Rarely are SSN-only imposters able to pull off that caper, but earnings erroneously credited to an SSN can cause chaos when the rightful SSN holder tries to apply for benefits.
5. Slow down your tax refund
Tax return ID theft has skyrocketed in recent years, according to the Internal Revenue Service. The Treasury Department’s inspector general says 1.6 million taxpayers were impacted by identity theft in the first six months of 2013.
This can affect you even if your identity wasn’t stolen. The IRS has massively stepped up its anti-ID theft efforts and turned up its fraud filters, which means it has slowed returns for many legitimate taxpayers.
6. Leave you with a criminal record/get you arrested
Criminal identity theft, perhaps the most dangerous form of identity theft, doesn’t even have to involve theft of money or credit. If a criminal is arrested and uses your name or your stolen driver’s license during booking, you could end up with a criminal record.
Innocent people have been arrested during routine traffic stops and in front of their children, and some have been thrown in jail on murder allegations. The problem became so serious at one point that several states created a special document called an “identity theft passport” to be carried by victims to prevent an erroneous arrest.
7. Kill you (virtually)
July Rivers of Alabama went to a bank with a simple request: She wanted to open an account. The bank refused, with this odd explanation: According to its information, she was dead. Soon, she found she was unable to get credit anywhere for the same reason: “The system” had “offed” her.
Perhaps it’s a surprise to you, perhaps not, that a living, breathing human being could not convince financial institutions that she was alive. They trusted their databases instead. Rivers lived through a digital murder mystery, trying to understand who “killed” her. Eventually, she learned an ID thief was using her information and apparently decided that registering himself/herself as dead was the best way to run away from creditors. Rivers had to spend years cleaning up the mess.
The Social Security Administration wrongly declares about 14,000 people dead every year.
8. Get you the wrong treatment at a hospital
Medical ID theft takes many forms, and the most common is what you’d expect — a criminal trying to steal money. Doctors can create fake patients and file fake claims, for example. One such victim discovered falsified claims for psychiatric sessions when he applied for a job, according to the World Privacy Forum.
The crime is growing. Last year, the Ponemon Institute said that medical ID theft impacts an estimated 1.84 million people. But the most frightening side effect of medical identity theft would be creation of a medical record by the impostor that impacts the victim’s future treatment.
Ponemon surveyed victims, who said the impacts were real. They told survey takers they’d experienced a misdiagnosis (15 percent), mistreatment (13 percent), delay in treatment (14 percent), or were prescribed the wrong drugs (11 percent).
9. Keep your kids from getting college financial aid
Child ID theft is tragic on many levels, but perhaps the worst part of the crime is that it often goes undetected for years. There’s a simple reason for this: 10-year-old kids have no reason to check their credit.
The crime is usually discovered when would-be college students fill out their first financial aid forms. Almost always, those forms are filled out under extreme time pressure and there is no time to clean up a pockmarked credit history. Even worse, fraudulent earnings that end up attached to an underaged child can have a direct impact on that student’s eligibility for financial aid and, in extreme circumstances, delay enrollment in college.
This is why it can be helpful to contact the three major credit reporting agencies – Equifax, Experian and TransUnion – and request your child’s credit reports far in advance (if your child has a credit file). If your child is younger than 18, he or she typically should not have a credit file; if they do, it may be because someone used their identity to open accounts.
You can avoid – or lessen the impact of – at least some of these issues if you regularly check your credit reports (here’s how to get them for free). By checking them at least once a year (more often if you’ve had identity theft problems in the past), you can spot errors or signs of fraud, like fraudulent accounts or bills in collections that aren’t yours. It can take time to clean up the mess, but being aware of the problem is an important first step.
If you monitor your credit scores (which you can do for free on Credit.com), and you notice a big, unexpected drop, that’s a sign to check your credit reports for problems.
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