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Target's security problems could impact home sales


NEW YORK - Jan. 5, 2014 -The recent massive data breach of up to 70 million customers' credit and debit cards at Target could have a spillover effect that derails some real estate transactions.

Potential buyers may find they have damaged credit files and lower credit scores over the coming months, and that could disqualify them from a mortgage - at least until they are able to fully document the problem.

Even more customers are at risk with recent data breaches reported at Neiman Marcus affecting 1.1 million customers – and at least six other retailers have reported breaches.

Target and Neiman Marcus are offering their customers free credit-monitoring services. But credit experts say many people have not yet taken advantage of it, possibly because they’re not aware of the offer.

The data thefts could put some consumers at risk for identity theft. While victims won’t likely be held liable for any unauthorized debts made on their credit cards, their credit reports and credit scores can be damaged for weeks or even longer if they fall victim to identity theft.

These data thefts have the potential to create "havoc on credit files for as long as it takes for the consumer to document [that] the accounts are due to identity theft and get them removed from the file," says Terry Clemans, executive director of the National Consumer Reporting Association, a trade group that represents independent credit-reporting companies that serve the mortgage industry. "The impact on credit scores, although short term, is devastating because they are current defaults and [trigger] a big hit to the score. With the sizes of the breaches, this could be painful for a long time."

Credit experts say that home sales could be derailed by the sudden appearance of new debts on buyers’ credit reports. Even if borrowers say they’re a victim of identity theft, they may still find the transaction put on hold as bureaus attempt to repair and verify the reports. That could cause buyers to miss contractual deadlines with the home seller, and possibly even prevent the transaction from going through, the Los Angeles Times reports.

Source: "Target Data Breach Could Affect Real Estate Transactions," Los Angeles Times (Feb. 2, 2014)

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Related Topics: Buyer services