Credit Score

How Identity Theft Can Impact Your Credit Score

Identity theft can impact your credit score in many ways. In fact, identity theft can impact your financial future and your very life if not discovered and dealt with in a timely manner. On a very basic level, identity thieves can steal money via unauthorized charges on your credit card or bank account. However, identity theft can range from a few unauthorized charges on an account to a criminal assuming your identity and wreaking havoc with your life. Here are the ways an identity thief can impact your credit score:

Opening Fraudulent Accounts Using Your Personal Information

If an identity thief has possession of enough of your personal information, they may be able to open credit card and other credit accounts in your name. Identity thieves do not make payments on the accounts they open, so these accounts will begin to reflect late and missed payments in your credit report.

New Accounts — Impact on FICO Score

When an identity thief opens new accounts using your financial information, the impact is also a negative one on your FICO score. About 10% of the score takes into consideration any new credit accounts.

Number of Credit Accounts — Impact on FICO Score

The number of credit card accounts an individual is managing is a factor in determining the FICO score. The more accounts an identity thief opens using your information, the more your score will drop.

Late or Missed Payments — Impact on FICO Score

Because your credit score is based on the history of how you pay your bills, having accounts in your name with late or missed payments will lower your credit score. Those with excellent or good credit scores will experience the most damage with late or missed payments. For example, an individual with a fair credit score of 680 with a payment that is one month late may see their FICO score drop up to 30 points. However, an individual with a good credit score, say a score of 750, will see a drop of 90 to 100 points for the same error. Identity theft will be most damaging to those individuals who have maintained a good to excellent credit history.

Unauthorized Access to Your Bank Accounts

If an identity thief is able to access your bank accounts, the effect could be financially devastating. The thief could potentially withdraw all of your cash at one time. The ripple effect would damage your credit score if you were unable to pay other bills on time.

Unauthorized Charges on Existing Credit Cards

Unauthorized charges on your existing credit cards or bank accounts can negatively impact your credit score. If you never max out your credit card accounts, and an identity thief accesses your account information, they may max out your credit card account. Maxed out cards are considerations in the calculation of your FICO score, so even one maxed out card will negatively impact your credit rating.

Maxed Out Credit Cards — Impact on FICO Score

Maxed out charge cards will impact your FICO score. If an identity thief maxes out one of your existing credit card accounts, the effect on your FICO score could be a decrease ranging from 10 to 45 points, according to CreditCards.com. This decrease could be applied to your credit score for one maxed out credit card. Imagine the damage that could potentially be done if the identity thief were able to access more than one credit card account, and max out all of your accounts. The effect on your FICO score would be damaging.

Guard Against Identity Theft

The best way to guard against identity theft is to protect your Social Security number, your personal information, and all of your account numbers. Never throw bank statements or credit card statements away in the trash. Always shred these documents, or keep them in a locked file.

Make sure that no one has access to your Social Security card or Social Security number (SSN) and do not give this information out over the phone or online. Regularly review your credit report from all three major credit bureaus. Make sure that none of the reports include any entries that you are not aware of or that are in error. If you find a questionable entry, contest the entry first with the credit bureau, and then contact the creditor for the details regarding the account. Because identity theft is so prevalent, most companies will work with you to resolve the issue.