Financial Consequences of Severe Identity Theft in the U.S

59 Pages Posted: 3 Dec 2021

See all articles by Nathan Blascak

Nathan Blascak

Federal Reserve Bank of Philadelphia

Julia S. Cheney

Federal Reserve Bank of Philadelphia

Robert M. Hunt

Consumer Finance Institute, Federal Reserve Bank of Philadelphia

Vyacheslav Mikhed

Federal Reserve Bank of Philadelphia

Dubravka Ritter

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Michael Vogan

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Date Written: December 1, 2021

Abstract

We examine how a negative shock from severe identity theft affects consumer credit market behavior in the United States. We show that the immediate effects of severe identity theft 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 they did prior to the identity theft incident.

Keywords: identity theft, fraud alert, consumer credit, credit performance, limited attention, inattention

JEL Classification: G5, D14, D18

Suggested Citation

Blascak, Nathan and Cheney, Julia S. and Hunt, Robert M. and Mikhed, Vyacheslav and Ritter, Dubravka and Vogan, Michael, Financial Consequences of Severe Identity Theft in the U.S (December 1, 2021). FRB of Philadelphia Working Paper No. 21-41, Available at SSRN: https://ssrn.com/abstract=3976662 or http://dx.doi.org/10.21799/frbp.wp.2021.41

Nathan Blascak (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Julia S. Cheney

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Robert M. Hunt

Consumer Finance Institute, Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States
215-574-3806 (Phone)
215-574-7101 (Fax)

Vyacheslav Mikhed

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Dubravka Ritter

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Michael Vogan

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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