Impact of Identity Theft on Applying for a Mortgage

Identity Thief
No one wants to be a victim of identity theft. But it happened to 15.4 million people in the United States last year. While there are many ramifications of being a victim of identity theft, one of the biggest issues is that it can impact your ability to get credit afterwards. This is especially true if the theft occurs shortly before you apply for a mortgage.

Some Identity Thieves Purchase a Home
You most likely think of a identity theft as someone opening a new credit card account or making purchases in your name. But some thieves actually use someone else’s identity to apply for a mortgage and purchase a house. When checking your credit report for errors, be sure to also keep an eye out for mortgages you did not apply for.

New Accounts and Late/Unpaid Bills Can Affect Credit Score
After you apply for a mortgage, the lender will run your credit  to look at your credit report and your credit score. If you have been a victim of identity theft, you may have unpaid bills lowering your credit score. Experts say lenders want you to have a minimum credit score, depending on the loan you’re applying for. You also may have accounts opened by the thief that are increasing your credit utilization percentage. If you are not aware of the issues or they are not properly resolved, it is possible that the theft can cause you to get a higher interest rate or even be turned down.

Recent Fraud Alerts Require Extra Steps for Mortgage Approval
After you discover you are a victim of identity theft, one of the first steps is to request a fraud alert be placed on your credit reports. However, if you are applying for a mortgage during this period, the alert can slow down the mortgage approval process.

The easiest way to keep identity theft from affecting your mortgage application is to take steps to prevent identity theft. Be sure to regularly check your credit report for signs of theft, protect your personal information, and shred documents containing information that can be used to open accounts, especially preapproved credit card offers.