Financial Consequences of Identity Theft

Nathan Blascak, Julia Cheney, Robert Hunt, Vyacheslav Mikhed, Dubravka Ritter and Michael Vogan

No 20-33, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: We examine how a negative shock from identity theft affects consumer credit market behavior. We show that the immediate effects of fraud on credit files are typically negative, small, and transitory. After those immediate effects fade, identity theft victims experience persistent increases in credit scores and declines in reported delinquencies, with a significant proportion of affected consumers transitioning from subprime-to-prime credit scores. Those consumers take advantage of their improved creditworthiness to obtain additional credit, including auto loans and mortgages. Despite having larger balances, these individuals default on their loans less than prior to identity theft.

Keywords: identity theft; fraud alert; consumer credit; credit performance; limited attention (search for similar items in EconPapers)
JEL-codes: D14 D18 G5 (search for similar items in EconPapers)
Pages: 60
Date: 2020-08-13
New Economics Papers: this item is included in nep-ban
Note: Supersedes Working Paper 19-02
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:88554

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DOI: 10.21799/frbp.wp.2020.33

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