Managing your credit history is a sensitive issue in itself, but when an identity theft problem or credit card scam hits, it becomes worst nightmare and gives sleepless nights.

Identity theft is the criminal activity in which sensitive information, such as bank account numbers, Social Security and credit card numbers, are stolen and misused and the owners are swindled out of large sums of money.

The problem comes when, for example, the consumer suffers identity theft with his credit card and is not aware of this act. The criminals can overwhelm the card and cause the debt to be kept by the owner. If this happens, the credit utilization rate skyrockets, dealing an immediate blow to the credit history.

This same situation can happen with the theft of Social Security information. Among their requirements for opening an account, loan or credit card, lenders and financial institutions often ask for the customer’s Social Security number. If the thief steals this information and generates false IDs, he can easily apply for a loan or open an infinite number of credit cards, which would affect the real person’s credit score.

It is important that people are aware of their accounts and credit history to quickly detect if you are a victim of identity theft. As soon as you see that you are a victim, you need to take action to avoid impacting your credit score. This process can take several months or even years, but you have to start it, because your history will allow you to access certain financial opportunities such as a mortgage loan that, if you don’t report this crime, you would never be able to obtain.

AnnualCreditReport.com offers you one free credit report per year from each of the major credit reporting agencies in the United States: Equifax, Experian and TransUnion. If you review your history and discover an error or a piece of information that harms you because of identity theft, you can dispute it with the credit bureaus.

If you were a victim of identity fraud, you should also report it to the Federal Trade Commission (FTC) online at IdentityTheft.gov or by phone at 1-877-438-4338. You should even file a police report.

To avoid damage to your credit history and credit score:

• Report the incident to TransUnion, Experian and Equifax by phone or mail.
• Freeze your credit history
• Set up a fraud alert
• Request a copy of your credit report through AnnualCreditReport.com
• Watch for unauthorized transactions or new accounts that don’t belong to you
• Contacting your creditors to close compromised accounts

To avoid these types of problems, it is recommended that you sign up for a credit monitoring or identity theft protection service.

Hi, I am Nikesh Mehta, owner and writer of this site. I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at [email protected].