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Financial Consequences of Identity Theft

Author

Listed:
  • Nathan Blascak
  • Julia S. Cheney
  • Robert M. Hunt
  • Vyacheslav Mikhed
  • Dubravka Ritter
  • Michael Vogan

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.

Suggested Citation

  • Nathan Blascak & Julia S. Cheney & Robert M. Hunt & Vyacheslav Mikhed & Dubravka Ritter & Michael Vogan, 2020. "Financial Consequences of Identity Theft," Working Papers 20-33, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpwp:88554
    DOI: 10.21799/frbp.wp.2020.33
    Note: Supersedes Working Paper 19-02
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    identity theft; fraud alert; consumer credit; credit performance; limited attention;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • G5 - Financial Economics - - Household Finance

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