During a marriage, the financial identities of both spouses often become intertwined through joint bank accounts, joint credit cards, co-mortgages, and more. Protecting yourself or your clients from financial identity theft during and after divorce should be a top priority.
According to the Federal Trade Commission, identity theft falls into six major categories:
- Employment or Tax-Related Fraud (34%): Using someone’s social security number and personal information to gain employment or file an income tax return.
- Credit Card Fraud (33%): Using someone else’s credit card or opening a new credit line in their name.
- Phone or Utility Fraud (13%): Using someone’s personal information to open a wireless phone or utility account.
- Bank Fraud (12%): Taking over an existing financial account or opening a new account using someone’s personal information.
- Loan or Lease Fraud (7%): Obtaining a loan or lease using someone else’s personal information.
- Government Documents or Benefits Fraud (7%): Using personal information to obtain government benefits.
Note: Percentages exceed 100% because some complaints involved more than one type of identity theft.
Identity theft during divorce is more common when one spouse controlled most family credit. The other spouse might struggle to establish new credit, rent, or buy a new home. Obtaining new utilities or phone services can be challenging with little or bad credit, leading to potential misuse of the former spouse's information.
Spouses have significant access to each other’s personal information, such as social security numbers and credit card details. The effects of identity theft on a client’s current and future credit can be devastating, requiring significant time and effort to correct.
Steps to Protect Against Financial Identity Theft
Step One: Freeze Credit Files
Consider placing a credit freeze on your report if you are concerned about identity theft or unauthorized access to your credit report. A security freeze restricts access to your credit report and can be lifted temporarily for specific purposes, like opening a new credit line, buying a house, or applying for a job. It’s free to place or lift a freeze.
Step Two: Monitor Credit Regularly
Consumers can access their free credit reports from each of the major credit bureaus annually. By checking your credit file with a different bureau every four months, you can monitor your credit for free throughout the year. Consider using an identity theft protection service for more diligent monitoring. Visit www.annualcreditreport.com for free access to credit reports.
Step Three: Update Security Questions and Passwords
During a divorce, change your security questions and passwords. Your former spouse likely knows the answers to common security questions, so updating them improves your account security.
Why It’s Important to Secure Financial Identity
Divorce is stressful and emotional, and even responsible individuals might do things they wouldn’t normally do. Securing your financial identity can save significant frustration and time in the future.
The Role of a Certified Divorce Lending Professional (CDLP®)
A Certified Divorce Lending Professional (CDLP®) can help divorcing homeowners make informed decisions about home equity solutions. They assist the professional divorce team in identifying potential conflicts between the divorce settlement, home equity solutions, and real property issues.
Involving a CDLP® Early in the Divorce Process
Involving a CDLP®early in the divorce settlement process can set the stage for successful mortgage financing in the future.
Disclaimer: This information is for educational purposes only and not for providing legal or tax advice. Contact an attorney or tax professional for legal and tax advice. Interest rates and fees are estimates provided for informational purposes and are subject to market changes. This is not a commitment to lend. Rates change daily—call for current quotations. The information in this newsletter has been prepared by, or purchased from, an independent third party and is distributed for consumer education.
Copyright 2021—All Rights Divorce Lending Association
