Does Identity Theft Affect My Credit Score?

Published on Oct 15, 2014 07:48 am

If you’re the victim of identity theft, knowing how to respond can help put you on the path back to normal. Once the fraud is recognized, and you’ve put your financial partners on notice, things will begin to be set right. However, this is a process that can take a considerable amount of time. Until all of the unauthorized activity is identified and removed from your credit report, your credit score may well suffer.

Late Payments
Making your payments to your creditors on time is a cornerstone of good credit behavior, as payment history is generally a major factor in your score. The biggest potential for danger here arises from accounts that you don’t monitor closely. If you don’t notice that an identity thief has made charges to a newly-opened fraudulent account in your name, you won’t know to make a payment or notify your credit card company before the due date comes and goes. Similarly, if you’re unaware that an account has been opened in your name, you may pile up late fees – and late payments that can impact your credit score – without even knowing it. These are serious issues, since a single 30-day late payment could trigger a drop in your score.

Higher Debt & Credit Utilization
After payment history, another significant part of your credit score is generally the amount of debt that you carry. If an identity thief adds charges to your accounts that go unnoticed, a rising debt level can lower your credit score. Additional damage can come in the form of increased credit utilization. The greater the percentage of your available credit that you use at any given time, the higher your credit utilization.  Typically, the higher your credit utilization, the more of an effect it has on your credit score.  This is why maxing out your cards isn’t good for the health of your credit. An identity thief who runs up your cards to their limits and beyond may cause a substantial drop in your score.

New Accounts & Credit Inquiries
One of the strategies that identity thieves employ is to open new accounts in the victim’s name. Unless you monitor your credit report closely, you may never know that a new account has been opened in your name, particularly if the thief uses a different mailing address than your residence. Inquiries for new credit, your number of new accounts and the age of your credit history all play a role in determining your credit score. A sudden influx of new accounts, inquiries or unauthorized charges can lower your score. Always be on the lookout for these kinds of notations on your credit report, and confirm that they match up with your actual credit behaviors.

Consequences
A bad credit score can run up the interest costs on loans you may apply for, from home mortgages to auto loans. You may not qualify for certain apartments, or even insurance with a weak credit score. An ounce of precaution regarding your credit accounts can help limit the damage that an identity thief can cause. Careful monitoring of your credit can keep you informed of any suspicious activity, such as new accounts that are opened in your name or unauthorized charges being placed on your cards. Being vigilant can help mitigate the damage caused by an identity thief, and minimize the length of time that any suspicious activity goes unnoticed.

About the Author
John Csiszar began writing in 1989 and his work appears in various online publications, including The Huffington Post. Csiszar earned a B.A. in English from UCLA and served 18 years as an investment adviser and certified financial planner.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.