How to Protect Yourself From HELOC Fraud

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How to Protect Yourself From HELOC Fraud

Now is the moment to verify your home equity line of credit (HELOC), if you don’t already. By stealing identities and deceiving lenders, thieves may access these accounts and withdraw thousands of dollars. By taking a few easy actions, the danger may be decreased and the victims’ credit can be repaired.

Key Takeaways

  • By stealing your identity and deceiving lenders, thieves may access your HELOC and take your money.
  • Verify your HELOC statements often, and check your credit reports for errors to lower the chance of fraud.
  • Call your lender, submit a police complaint, and get in touch with the credit reporting companies to ask that a fraud alert be put on your credit reports if you suspect fraud.

How HELOCs Work

With a HELOC, homeowners may borrow money against the value of the equity they have in their property, which increases as their mortgage is paid off. Homeowners are granted a certain amount, which becomes their credit limit, with certain limitations on how they might spend it.

Typically, lenders will allow you to borrow up to 85% of the home’s assessed value, less the amount you still owe on your normal mortgage. Many HELOCs have a set time limit for borrowing the funds after which the credit may be renewed.

Instead of using a HELOC to pay for regular expenses, most individuals utilize them to finance home upgrades. As a consequence, people can forget they have an account or fail to monitor it. Unfortunately, thieves are aware of this ignorance and consider HELOCs to be a desirable target.

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Anyone with equity in their house is vulnerable, but homeowners with strong credit and senior citizens who have paid off their mortgages are more likely to fall prey.

How HELOC Fraudsters Operate

According to the Federal Bureau of Investigation, mortgage fraud includes false claims, representations, and omissions that are subsequently relied upon by a lender without their knowledge (FBI).Mortgage fraud includes fraud involving home equity loans. Criminals have stolen from HELOC accounts in a number of ways, most notably via identity theft frauds.

This is how it goes down. Your personal information, including your date of birth, Social Security number, direct deposit account number, and mother’s maiden name, may be obtained by identity thieves in a number of methods, including via public records or email phishing. These details are used by crooks to impersonate victims, particularly you.

For instance, the fraudsters could create a bogus online bank account and connect it to your HELOC using your personal information. They phone the bank pretending to be you and ask questions about the accounts, request checks, and raise the daily withdrawal limit. The scammers then get online access to the accounts, withdraw or transfer money from your HELOC to the account they opened.

In other words, they are stealing money using your personal information, credit rating, and the value of your house. Few documentation are required to create a HELOC, particularly if the HELOC is being taken out from the lender that owns your mortgage, which is one reason why crooks may get away with this crime.

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Only when the financial institution contacts you about a late payment, when you get written notice of a missing payment (since the criminals aren’t returning the money, of course), or when you check your credit report and discover false information, may you become aware of the crime.

Your house is utilized as security for the loaned funds when you take out a HELOC. You can ultimately lose your house if a payment is missed or not able to be made.

Reducing HELOC Fraud Risk

By monitoring your HELOC bills often and verifying your credit reports for any incorrect information, you may lessen your risk of being a victim of HELOC fraud. One of the three main credit agencies (Equifax, Experian, and TransUnion) may provide access to your credit reports, and you are entitled to a free copy of each report once a year. Keep your mail safe and be aware of any changes. For your online accounts, create strong passwords.

Additionally, you might apply for a credit freeze as a more drastic action. This stops the three main credit bureaus from disclosing details from your credit record unless you provide permission.

Due to the suffering brought on by the COVID-19 pandemic, the three credit reporting agencies are providing free weekly credit reports on until April 20, 2022.

What to Do If You Suspect Fraud

The first thing you should do if you see questionable behavior is inform your banking institution. The next step is to make contact with your neighborhood police and report a crime. Talk to anybody else who could be connected to the account, including collection agencies, the business that issued the credit line, and credit reporting organizations.

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Have the police report on hand when speaking with the credit bureaus, and request that an extended fraud alert be put on your credit reports. This informs lenders that they must contact you first before granting credit in your name. The credit bureaus may request a copy of your identity theft report from local, state, or federal law enforcement.

Organizations that fight identity theft, like the non-profit Identity Theft Resource Center, might also be of aid.

The Bottom Line

Identity thieves are always coming up with new methods to commit crimes, but by keeping an eye on your home equity line of credit, you may prevent them from utilizing it and save yourself some trouble. If you discover that your credit has been compromised, take immediate action by notifying all affected institutions.

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