How Will the Equifax Data Breach Affect Your Ability to Get a Mortgage?
September 22, 2017
Like throwing a stone into a pond, the Equifax data breach has long-lasting repercussions. Already, because of what’s being considered one of the largest data breaches in recent history, 143 million consumers may be affected. Data compromised in the breach has the potential to impact any form of credit taken out in the U.S. — including mortgages, credit cards, and car loans.
WHAT ARE THE CONSEQUENCES OF THE EQUIFAX DATA BREACH?
The credit-reporting agency Equifax recently revealed that a data breach lasting from mid-May through July 2017 gave hackers access to their consumers’ names, Social Security numbers, addresses, birth dates, and, for some, driver’s license numbers. The Federal Trade Commission confirms that credit card numbers were stolen from an estimated 209,000 people and documents with personally identifying information for roughly 182,000 others. Hackers also accessed personal data for customers in the UK and Canada. Equifax says their agency didn’t discover the breach until July 29, 2017, after most of the damage was done.
Anyone who may be affected by the breach is encouraged to act fast, Lisa Lindsay, executive director of the collaborative group Private Risk Management Association (PRMA), which aims to raise awareness and educate agents and brokers, says. “Consumers will need to evaluate what they want to do next with regards to protection and what risk management options they want to take. Such as purchasing cyber and fraud insurance. Those impacted by the breach could be at risk for additional attacks.”
WE ENCOURAGE ALL OUR BORROWERS AND FUTURE BORROWERS TO TAKE ACTION:
Protect yourself against potential identity theft by visiting AnnualCreditReport.com to review your credit report for fraudulent activity.
Place a fraud alert or credit freeze where needed to make it more difficult to open unauthorized accounts in your name.
Stay educated and get more resources from the FTC’s Privacy, Identity, and Online Security site.
HOW WILL THE DATA BREACH AFFECT GETTING A MORTGAGE?
Buying a house may be the biggest financial decision you make. The last thing that you need is a credit setback — or disaster. Megan Zavieh, a Georgia attorney-at-law, explains that the full ramifications of the data breach have yet to be known because we don’t know who accessed private data or what they may ultimately do with it. But, she says, it could impact homebuyers significantly.
“If someone uses personal data to open new credit lines or take other typical identity theft actions, homebuyers could be in for a terrible surprise when they complete their home loan applications. Often, credit report correction following identity theft is a long process. And it could well prevent loans from closing if borrowers had identities stolen after the Equifax breach,” Zavieh says.
ADDING TO THE POST-EQUIFAX FRENZY, MANY PEOPLE ARE SEEKING TO FREEZE THEIR CREDIT IN THE WAKE OF THE BREACH.
David Reiss, Professor of Law and Academic Program Director of CUBE, The Center for Urban Business Entrepreneurship at Brooklyn Law School, says, “Those who are looking to refinance their mortgage or purchase a new home should be aware of how a credit freeze affects them. When they are ready to take the plunge and apply, they will need to contact the credit rating agencies where they had placed a freeze and lift the freeze temporarily.” Just as importantly, Reiss reminds buyers to put the freeze back in place after completing the mortgage process.
During the time when you’re buying a home and the freeze is lifted, you can place a 90-day fraud alert on your credit. Reiss explains that this should limit lenders from granting credit under your name without first verifying that you are the one who applied for the loan.
HOW DOES YOUR CREDIT IMPACT GETTING A MORTGAGE?
Your credit score plays a major part in your mortgage. When you prequalify for a home loan, your lender will look at your credit score to reflect your eligibility for a competitive mortgage rate.
Credit scores range from 300 to 850. A higher number means better credit and could open the door to a better mortgage interest rate. When you prequalify for a mortgage using our free and highly secure LoanFly app, your loan officer will provide you with your credit score through the app. Once you’re prequalified, you can access the secure LoanFly Borrower Portal to view your credit score, download your full credit report, and stay educated on the ups and downs of credit scoring. The LoanFly Borrower Portal also includes a built-in credit rating meter to help you gauge your score.
A higher credit score represents better credit and lowers your risk in the eyes of a lender. This is again why checking on your credit score after the data breach is so important. You’re entitled to a free annual credit report each year (at www.AnnualCreditReport.com) that you can use to keep tabs on your credit and check for suspicious activity. Compromised credit can affect your ability to qualify for a mortgage, as well as the mortgage rate you get. Compromised credit can also potentially increase your mortgage rate — and your monthly mortgage payment.
WHAT CAN YOU CONTINUE TO DO TO PROTECT YOUR INFORMATION?
Under normal circumstances, it’s always a good practice to pull your credit report as soon as you start thinking about buying a home. By doing this, you’ll get the opportunity to check for erroneous information and clear it up before getting prequalified. (Whether it’s the wrong address or fraudulent activity.)
“Your creditworthiness is key in the homebuying process. You want to position yourself as a good risk to any lender that looks at your application,” Katie Ross, Education and Development Manager for the national financial education nonprofit American Consumer Credit Counseling, explains. Ross says it can take six months to a year to update credit reports and start rebuilding your score.
Under special circumstances, like the recent Equifax data breach, this is the time for homebuyers to stay vigilant. You can start by using our action steps above to determine if your information has been affected. Zavieh then recommends the active monitoring of credit accounts and putting fraud locks on credit files as the best defense.
WE’RE URGING OUR BORROWERS TO STAY COMMITTED TO MONITORING THEIR CREDIT FOR THE FUTURE:
Activity from the Equifax breach could still show up months later.
Even with a clean credit report, freezing your credit or setting up fraud alerts will make it harder for an identity thief to open up a credit card or take out a loan in your name.
Pay special attention around tax season in April. This is when your Social Security number is more likely to be stolen for a refund.
You may also choose to purchase additional cyber or fraud insurance, as Lindsay noted above. But check with your provider first. Identity theft coverage, which may include credit monitoring, is often lumped in to homeowners’ insurance policies.