How the Equifax Breach Could Affect Your Ability to Get a Mortgage or Refinance a Home

The Equifax data breach happened months ago, but the impacts could be felt by consumers for years to come. In worst case scenarios, those who’ve had their financial information stolen could face long term issues with credit that may make it difficult for them to take out mortgages or refinance their homes.

In this post, we’ll review what’s known about the breach so far, why it matters for mortgage and refinance customers, and how you can protect yourself and your personal financial information, now and when you’re ready to buy your next home.

The Equifax Breach in Briefright

In early September, Equifax, one of the three major U.S. credit reporting agencies, reported a part of its system had been accessed by hackers. The cyberattack was focused on a web application, where Equifax customers could report problems with their Equifax credit report. CNN reported an unpatched security flaw which allowed hackers to take control of the website, accessing private consumer data on at least several occasions between mid-May and July 30, 2017.

“Bar none, this is the worst data breach we’ve ever had,” Rob Douglas, an identity theft security expert, told Realtor.com. “This is the one everyone worried about.” The initial estimate of 143 million American consumers affected was bumped up to 145.5 million in October. Equifax has reported that hackers gained access to names, addresses, Social Security numbers, and dates of birth. In some cases, driver’s license numbers, credit card numbers, and even credit dispute information was exposed.

“It’s not a breach where they just got a Social Security number or another breach where they just got a credit card number. Here, they got the whole enchilada,” Douglas noted, calling the situation a “danger for a lifetime.”

The Fallout for Mortgage and Refinance Customers

The Equifax breach has far-reaching consequences for consumers seeking access to credit from financial institutions, such as the application for a home mortgage or the refinance of an existing mortgage.

The primary risk to consumers isn’t that hackers could buy a home in your name. Thankfully, that remains an unlikely scenario. However, it’s much more possible that criminals could use the stolen personal financial information to open other, smaller lines of credit, such as credit cards, bank accounts, and so on. That may not be as bad as having a house bought in your name, but it could still throw a wrench in the works if you’re trying to buy or refinance a home.

For mortgage customers, time is of the essence. The housing market is seasonal, meaning a delay from a faulty credit report and identity theft could mean missing the ideal window for buying a home in your regional market. Credit cards or bank accounts falsely opened in your name could also prevent you from being approved for a home loan. Lenders are strict when it comes to their debt-to-income ratio rules for obtaining a loan, and an unknown line of credit could stall out a sale. Delays themselves are a problem, as many sellers are hoping to close quickly, and buyers may also have a time-limited interest rate lock to worry about. One loan officer told Realtor.com it’s still possible to address an identity theft problem and make it to the closing table, but it’s not easy.

For refinance customers, a case of identity theft or fraudulently created debts can also cause time-sensitive problems. Most refinance customers choose to refinance when rates are favorable, when they have a change in personal finances, or when an adjustable-rate mortgage’s introductory rate is close to expiring. Problems can pop up if lenders find credit issues during the refinance application process, and that can sidetrack your refinance plans.

Protecting Yourself After the Breach

Unfortunately, the breach has already happened, and many consumers have already had their information compromised. However, it’s not too late to protect yourself from fraud or identity theft, whether your info was exposed in the breach or not.

Ongoing Action for Consumers

The Federal Trade Commission (FTC) recommends American consumers visit Equifax’s dedicated website for this incident, www.equifaxsecurity2017.com, to find out for sure if your information was exposed as part of this data breach. The FTC website has detailed instructions on how to do so. The same website allows consumers to enroll for one year’s worth of free credit monitoring.

Consumers can request their credit reports from each of the big-three agencies, Equifax, Experian, and TransUnion, each year for free. The FTC notice recommends consumers visit annualcreditreport.com to check their credit reports.

Beyond credit monitoring, placing a credit fraud alert or credit freeze on your accounts with Equifax, Experian, and TransUnion makes it more difficult for criminals to open new accounts with your credentials. Brian Wickert, president of Accunet Mortgage, recently detailed this process for readers of the Milwaukee Journal Sentinel.

Bankrate advises paying attention to your accounts and your data security around tax season, a popular time for thieves running tax refund fraud schemes using fraudulent Social Security numbers. For those worried about financial damage from identity theft, there’s also identity protection or cyber fraud insurance.

When You’re Ready to Buy or Refinance

Ongoing attention to your credit accounts can head off many problems that might otherwise come up when it’s time to refinance or buy your next home. But there are still a few things to take care of before you start home shopping.

Pull your credit report again when you start thinking about buying. Start working to fix any errors in your personal info or credit history now before you get to the loan office. Incorrect address info as well as past-due accounts, even if they have nothing to do with a credit breach, can still slow down your loan application, so it’s good to fix them early. Challenge any errors you find.

Before applying for a home purchase loan or a refinance, be sure to lift any fraud alerts or credit freezes you placed on your accounts – you can reinstate these protections after you close on your mortgage.

Once you’ve closed on your home, make sure to ask your homeowners insurance provider about what’s included in your coverage. Many include some type of credit monitoring coverage, which means you may not need to buy separate coverage to be fully protected.

A major incident like the Equifax breach can be a shock to homebuyers and homeowners worried about their finances. Though the situation may cause some inconveniences, it serves as a good reminder of the need for vigilance when it comes to your credit. Whether you were affected by this breach or not, take this opportunity to check up on your credit report status and consider added protections to keep your finances secure.

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